Employer sell Car to Employee which is used by employee. what is GST impact on invoice, Goods and Services Tax - GST

[gopinath lakshmanan]

Dear Sir,

Mr.X (employee) is working in Y Ltd (employer). Y bought car from Z Ltd under lease which is group company. Now X got car from Y.car price ₹ 8.11 lakh inclusive of VAT 14.5% (Rs95623). Mr.X is leaving the company and there is no surrender option. Mr.x compulsory to buy the car the invoice price ₹ 7.64 and charging GST @ 29% ₹ 2.21 lakh on Fair Market Value. Is liable to pay GST by employee? if yes, what is the applicable rate under GST law. Pls clarify.

Posts / Replies

[KASTURI SETHI]

GST is applicable only if it is proved that such resale is in the course or furtherance of business. If not, it is out of the definition of 'Supply' in terms of Section 7(1) of CGST Act.

[Himansu Sekhar]

The employer for his sell will pay gst. He will collect it from employee. It is not an employer employee relation.

[Ganeshan Kalyani]

GST is applicable as the car has been sold in course of the business though it is not the activity of the business to sell car. Gst is applicable @ 28% and Cess is applicable as per CC and variant of the car.

[KASTURI SETHI]

Suppose if I sell my old and used cat, GST is not leviable as such sale is not in the course or furtherance of business. If Director of company sells old and used car belonging to company, even then such resale is not in the course or furtherance of business as the company is not engaged the business of sale of old and used car. This is not their business. No profit has been earned by the company. Depreciation of the car is also there. Suppose tomorrow the company sells old and used refrigerator, will they pay GST ? No not applicable. Old and and used has to be disposed of ultimately. Before taking any decision, we must know the legal definition of each word , course, business and furtherance.This is my view after thorough analysis.

[Himansu Sekhar]

Sir, selling a car is a separate transaction. If somebody sells a car which has ultimately be sold in the course of business, then no gst will be applicable to the individual. Otherwise an individual is protected under the threshold exemption. Selling from urd to urd also does not attract gst. The used car under a separate transaction sold with consideration. Each transaction with a consideration is a business.

[Himansu Sekhar]

Rightly said by srti kalyaniji.

[Gaurav Bhatnagar]

GST should not be applicable on the transactions of sale of Used Cars by a Company who is not in the business of Used Cars. I am also facing the same problem.

While categorically dealing with the issue of Sales Tax on the sale of Used Cars in case of a Pharmaceutical Company in old Tax regime, the Division Bench of Delhi High Court in “Panacea Biotech Ltd. vs Commissioner of Trade and Taxes, = 2012 (12) TMI 826 - DELHI HIGH COURT ” have minutely reviewed the Definition of Business under Section 2 (c) Delhi Sales Tax Act, 1975, which is materially the same as given in CGST Act (Sec. 2(17) - Definition of Business )). The High Court held that:

• The selling of used cars cannot by any stretch of the imagination be characterized as "ancillary" or incidental to that business.
• The assesse never held them for the purpose of sale and purchase, but for using them.
• At the stage of purchase, they suffered sales tax, which the assessee, as buyer, was bound to pay.
• The levy of sales tax on an already taxed vehicle with little relation to the business will give rise to an anomaly.

The above judgment also deals with the fundamental principles of Taxation which remains intact irrespective of any Tax Regime. For more clarity, read the above judgment in the light of Definitions of Business and Supply, and you may find that the conclusion shall be same as stated above. Same views are taken by various other High Courts in other similar cases also.

[Parveen Kaushik]

Dear sir

I am also facing the same issue. My employer has a leased company as a group company which provides vehicles to employees on 4 years of lease but if employee left comany prior the this period the he/she needs to pay the rest amount.

In my case, employer is saying that GST is applicable on resale of vehice and the car value is exceeding thE showroom price even.

I want to know the final result of your case.

Was GST applicable to your case or not?

Please reply

Regards

Parveen Kaushik

[Venkatanarayanan K]

Dear sir, I am facing the same issue. Is there any update post the latest GST council meeting held on 19th Nov 2017 or any one challenged against basis any legality?

Regards Venkat

[Reji Jose]

Sir any updates on this question with the changes in tax rates