GST Council Recommended Change in GST Rate on sale of old and used medium vehicles, details as under:

GST Rate reduced to 18% from 28%.

GST Rate reduced to 12% from 28%.

Now the question arises, whether a businessman who purchase a car / truck and sold is exempted from paying tax becasue in almost all of the cases, margin of the supplier is negative ? 

In our opinion, this rate is applicable in case Margin Scheme as per Rule 32(5) of CGST Rules 2017 applicable. As per the scheme,  in respect of second hand goods, a person dealing is such goods may be allowed to pay tax on the margin i.e. the difference between  the  value  at  which  the  goods  are  supplied  and  the  price  at  which  the  goods  are  purchased.  If  there  is  no  margin,  no  GST  is  charged  for  such  supply.  

For instance, a company say M/s OUC Co. Ltd, which deals in buying  and  selling  of  second  hand  cars,  purchases  a  second  hand  Maruti  Celerio  Car  of  March,  2014  make  (Original  price  Rs.  5  lakhs)  for ₹ 3 lakhs from an unregistered person and sells the same after minor furbishing in July, 2017 for ₹ 3,50,000/-. The supply of the car to the company for ₹ 3 lakhs shall be exempted and the supply of the  same  by  the  company  to  its  customer  for  Rs.  3.5  lakhs  shall  be  taxed  and  GST  shall  be  levied.  The  value  for  GST  purpose  shall  be  ₹ 50000/-, i.e.the difference between the selling and the purchase price of the company. The above table referred about this margin of Rs 50000/-.

Some facts:

1. This scheme is applicable in case of registered person dealing in buying and selling of  second  hand  goods.

2. This scheme is not applicable in case registered person or unregistered person having aggregate turnover more than 20 lacs / 10 lacs during the FY in case old or used assets as classifed as buinsess asset transferred permanetly or disponsed off to another person.

3.  Truck / Fleet Owner are allowed to take exemption from regisration under sec. 23 of CGST Act subject to the satisfaction of conditions (viz. Truck Owner getting revenue from giving truck on hire to GTA, Fleet Owner getting revenue only from those transaction where recipient of service are liable to pay tax under reverse charge). In case truck owner / fleet owner sold his truck and his aggregate turnover considering this exceed the threshold limit, then he is required to registered and pay tax on the Transaction Value and not on the Margin Value.

For example:

Truck Owner resided in Kolkata having receipt on account of transportation is  Rs 28 lacs in a FY and now he sold his old truck at Rs 2 lacs, then his aggregate turnover exceeds Rs 20 lacs, accordingly liable to take registration and pay tax on Rs 2 lacs.

He can't registered himself as a Casual Taxabel Person becasue that is allowed only in case where he occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business.

4. CBEC in FAQ clarified that 

Question 9: In transport industry, old vehicles, old tyres, scrap material etc, on which no input tax credit (ITC) has been taken, are disposed of after completion of their useful life. As a truck owner disposing of these goods, am I required to pay GST considering that no ITC has been taken at the time of their initial purchases? Would levy of tax in such cases not amount to double taxation, as tax has already been paid at the time of initial purchases?

Answer: Under section 7 of the CGST Act, 2017 supply includes all forms of supply of goods such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Sale or disposal of old vehicles, old tyres and scrap material for a consideration would therefore attract GST regardless of whether ITC has been availed or not.

5. If  margin  scheme  is  opted  for  a  transaction  of  second  hand  goods,  the person selling the car to the company shall not issue any taxable invoice and the company purchasing the car shall not claim any ITC.

6.  Notification No.10/2017-Central Tax (Rate) New Delhi, dated 28th June, 2017 exempts intra-State supplies of second hand goods received by a registered person, dealing in buying and selling of  second  hand  goods  and  who  pays  the  central  tax  on  the  value  of outward supply of such second hand goods as determined under sub-rule (5) of rule 32 of the CGST Rules, 2017, from any unregistered supplier,  from  the  whole  of  the  central  tax  levied  under  the  CGST  Act, 2017. Similar exemptions are also there in respective SGST Acts.