By Abhirup Ghosh, (firstname.lastname@example.org, email@example.com)
The GST Council met for the 25th time on 18th January, 2018 to modify the GST law in order to tackle the difficulties being faced in the market. The Council recommended several changes to the law among and one of the change that has can cause a significant impact on the vehicle industry is reduction of rate of tax on sale or purchase of used motor vehicles.
The council suggested the following change may be incorporated in the rate schedule:
|Sl No.||Chapter/Heading/Sub-heading/Tariff item||Description||Rate of GST|
|1||87||Old and used motor vehicles [medium and large cars and SUVs] on the margin of the supplier, subject to the condition that no input tax credit of central excise duty/value added tax or GST paid on such vehicles has been availed by him.||18%|
|2||8702||Buses, for use in public transport, which exclusively run on bio-fuels.||18%|
|3||87||All types of old and used motors vehicles [other than medium and large cars and SUVs] on the margin of the supplier of subject to the conditions that no input tax credit of central excise duty /value added tax or GST paid on such vehicles has been availed by him.||12%|
The language suggests that the rate of tax on the margin of the supplier will stand reduced from 28% to:
- 18% in case of old and used medium and large cars and SUVs
- 12% in case of other motor vehicles
provided the supplier has not claimed input of taxes paid on such vehicles. Therefore, in case the supplier avails the input tax credit, this benefit shall not be available and the supplier will have to charge GST at the rate of the 28% on the sale.
There has been a consequent modification in the rate of compensation cess as well. Currently, compensation cess is charged on the margin earned by the supplier at the rate applicable on the type of vehicle being sold. The Council has proposed to reduce the rate of compensation cess to nil on old and used motor vehicles.
Here it is important to note that for the purpose of GST law, the term “motor vehicles” include motor cycles. Therefore, this concession will be available on sale of used bikes as well.
This note is however, based on the current state of the proposed law and we will have to wait till 25th January to see if this change sustains or not.
The detailed recommendations can be viewed here:
- Recommendations relating to change in the GST rate on certain goods –
- Recommendations relating to change in the GST rate on certain services –
- Policy changes recommended by GST Council –