The Central Board of Indirect Taxes & Custom (CBIC) has notified 18 per cent GST on sale margin of old and used electric vehicles and smaller petrol & diesel cars. Also, 5-star hotels with room tariff of ₹7500 or more can levy 5 per cent GST in restaurants located insider their premise, but only without claiming Input Tax Credit (ITC)
While, the new taxation norm for sale transaction of old & used EV and other small vehicles has come into force with immediate effect, new taxation rule for restaurants inside 5-star hotels will be effective from April 1.
Old and used vehicles
The GST Council on July 21 recommended bringing sale of old and used electric vehicles (EVs) and smaller petrol and diesel cars on a par with other vehicles.
The Council recommended increasing the GST rate to 18 per cent from 12 per cent on sale of all old and used vehicles, including EVs, other than those specified at 18 per cent – sale of old and used petrol vehicles with engine capacity of 1,200 cc or more and of length 4,000 mm or more; diesel vehicles with engine capacity of 1,500 cc or more and length of 4,000 mm and SUVs.
This was done to unify and prescribe a single rate of GST on sale of all old and used vehicles including EVs. Also. government officials clarified that there is no new tax. “No GST applicable if an individual sells old and used car to another individual,” said an official.
Only registered persons such as businesses involved in purchase and selling of old and used vehicles etc are liable to pay GST. Where the registered person has claimed depreciation under the Income Tax Act, GST is payable only on the value representing the margin of the supplier i.e. the difference between consideration received for the supply of such goods and the depreciated value of such goods on the date of supply.
Where such margin is negative, no GST is payable. In any other case, GST is payable only on the value that represents the margin of the supplier i.e. the difference between selling price and the purchase price. Where such margin is negative, no GST is payable.
New norms can be understood with the help of two examples. Suppose a registered person is selling an old and used vehicle to another person for ₹10 lakh, where the purchase price of the vehicle was ₹20 lakh and has claimed depreciation of ₹8 lakh on the same under the Income Tax Act, then he is not required to pay any GST as the margin of the supplier i.e. differential value of the selling price (₹10 lakh) and the depreciated value (₹12 lakh i.e ₹8 lakh deducted from ₹20 lakh) is negative.
In case the depreciated value in the above example remains the same at ₹12 lakh and the selling price is ₹15 lakh, then the GST will be payable on the margin of the supplier i.e on ₹3 lakh at 18 per cent.
Similarly, suppose a registered person is selling an old and used vehicle to any person at ₹10 lakh, where the purchase price of the vehicle by the registered person was ₹12 lakh, then he is not required to pay any GST as the margin of the supplier is negative in this case. In cases where the purchase price of the vehicle was ₹20 lakh and the selling price is ₹22 lakh, GST will be payable on the margin of supplier, that is, ₹2 lakh.
