• GST on used cars in composition scheme

AS PER RULE 6(5) OF VALUATION RULES Value of supply for used goods shall be the difference between the selling price and purchase price . AND section 2(6) says aggregate value of taxable supply is aggregate turnover.
Does it interpret that turnover of used goods is selling price- purchase price.
If I am registered under composition scheme will this be considered as turnover. (selling price- purchase price).
Asked 6 years ago in GST

The turnover is your selling price and not the difference between selling price and purchase price, which is a margin. You will be effectively paying tax on such value addition only.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

You may be able to take the benefit of Rule 6(5) of the Valuation Rules, as mentioned by you, for determining the turnover, whether or not you are a dealer under composition scheme.

In determining aggregate turnover, the CGST Act is silent on transfer of vehicle in the name of the dealer in the intervening period between purchase and sale, though normally transfer forms are obtained from the seller by the dealer and actual transfer takes place only between the buyer and the seller. If the actual transfer does take place only between the buyer and the seller, the risks and rewards relating to such vehicle remain with the seller even if the vehicle is in the possession of the dealer.

If however, the vehicle is transferred to the dealer, then the turnover under the Income Tax Act means only the actual sales and not sales less purchases.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

If the vehicles purchased by you for resale are not registered in your name, you can safely avail the benefit under the valuation rule and take only the difference between the selling price and purchase price for calculating aggregate turnover

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

I suggest that you should take professional help from a local CA to represent your case

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

Hello Sir,

You are very well correct that the definition of the turnover is Sale minus Purchase in the case of second hand goods. Could you please highlight as to what is the stance of the commissioner and on what grounds is he saying that.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

Hi,

Yes, you are absolutely correct.

Rule 6(5) of "Determination of Value of Supply" rules state as follows:

"Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e. used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on purchase of such goods the value of supply shall be the difference between the selling price and purchase price and where the value of such supply is negative it shall be ignored."

Please let us know why the officer is denying this claim

Please feel free to call/ revert in case you need more clarity

Thanks and regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi

Your interpretation of the valuation rules is correct. The turnover shall be the difference value.

Please elaborate the second question regarding convincing the GST officer.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Its advisable to take the help of a local CA to represent your case. The usual assumption is that the turnover means the sale value and not the difference between sale and purchase price. However, in your specific case, the definition of supply u/r 6(5) of the Valuation Rules is beneficial to you, which can be used in your favour for deining aggregate turnover u/s 2(6). There are no conditions like title and ownership prescribed. So its worth trying with the help of a local CA.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

It can be done only through the proper interpretation of the definitions under the Act.

How have you communicated with the commissioner? Please get a proper submission done by describing the definitions and thus proving turnover to only include the margin amount. A CA can help you with submitting a proper reply.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

You should take help of a professional to represent your case effectively.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

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