TAXABILITY OF

MOTOR VEHICLES
UNDER GST
UNDER GST
A MASTER GUIDE ON TAXABLITY ON MOTOR VEHICLES - BY CA HARSHIL SHETH | 9879831157

INDEX

PAGE 2 INWARD SIDE – ITC ON MOTOR VEHICLE

PAGE 4 OUTWARD SIDE- GST RATES ON MOTOR VEHICLES

PAGE 7 OUTWARD SIDE- GST RATES ON USED MOTOR VEHICLES

PAGE 8 OUTWARD SIDE- GST RATES FOR SERVICES RELATED TO MOTOR VEHICLES BUSINESS

1|Page CA HARSHIL SHETH | CA.HARSHILSHETH@GMAIL.COM | 9879831157

 PART 1 – INWARD SIDE
ITC OF / IN RESPECT OF MOTOR VEHICLES

SECTION 17(5) OF CGST ACT - Under section 17(5) of CGST Act, there are certain supplies on which input tax credit under GST is not available. These
supplies can also be said as blocked credit.

Section 17(5) of the Central Goods and Services Act, 2017 provides that input tax credit in respect of the following shall not be available-

(a) Motor vehicles and other conveyances except when they are used-

(i) For making the following taxable supplies, namely-

(A) Further supply of such vehicles or conveyances; or

(B) Transportation of passengers; or

(C) Imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) For transportation of goods;

Examples where credit of motor vehicles can be availed: Dealer of vehicles, cab providers, trucks/vehicles used by factories for transportation of goods.
It is important to understand that there is nothing mentioned about whether the credit would be available on purchase of motor vehicle. Since, the act provides
that the credit is not available on motor vehicles it can be concluded that all input tax credit in relation to motor vehicle cannot be claimed except used in the
supplies as mentioned above.

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 ITC OF / IN
RESPECT OF
MOTOR VEHICLES

FOR
FOR GTA
OTHERS

OUTWARD LIABLITY OF Assessee in the business of

Assessee in the business
TAX IS DISCGARGED BY making Taxable Supply of Assessee in business of
OUTWARD LIABLITY IS Imparting training on Assessee uses Motor
RECEIPIENT UNDER RCM FURTHER SUPPLY OF SUCH Transportation of
DISCHARGED BY GTA AND driving, flying, navigating Vehicle or Conveyance for
@ 5% UNDER VEHICLES OR passengers i.e Tour &
OPTING 12% OPTION such vehicles i.e MOTOR Transportaion of Goods
NOTIFICATION 13/2017 ( CONVEYANCES i.e CAR Travel Buisness
DRIVING SCHOOL
Rate) DEALERS

ITC NOT AVAILABLE AS PER

ITC AVAILABLE Notification No. 11/2017- ITC AVAILABLE ITC AVAILABLE ITC AVAILABLE ITC AVAILABLE
Central Tax (Rate).

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 PART 2- OUTWARD SIDE
PART 2.1 - GST RATES on Motor Vehicles ( updated till 30-11-17)

5% 18%

12%

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 28%

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 COMPENSATION CESS on Motor Vehicles ( updated till 30-11-17)

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PART 2.2 - GST TAX RATE ON SALE OF OLD AND USED VEHICLES:
Government by issuing the Notification No. 8/2018 Central Tax Rate read with state Tax Notification, reduced the Rate of GST on old and used vehicle
as follows:
S. Chapter, Description of Goods Rate
No. Heading,
Sub- heading
or Tariff item

(1) (2) (3) (4)

1. 8703 Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of 18%
engine capacity of 1200 cc or more and of length of 4000 mm or more.
Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the
Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under.

2. 8703 Old and used, diesel driven motor vehicles of engine capacity of 1500 cc or more and of length of 4000 mm 18%
Explanation. – For the purposes of this entry, the specification of the motor vehicle shall be determined as per the
Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under.

3 8703 Old and used motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles 18%
(SUVs) including utility vehicles.
Explanation. – For the purposes of this entry, SUV includes a motor vehicle of length exceeding 4000 mm and
having ground clearance of 170 mm. and above.

4. 87 All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3 12%
Note: Government also exempted the Cess applicable on sale of Used vehicle through Notification 1/2018 Compensession Cess Rate

Valuation of Old or Used car for GST Calculation

Value on which GST at above rates to be calculated shall be Margin of Supply which is to be calculated in the manner as mentioned in Notification
which is given below:

1. In Case Depreciation under Income Tax Act Availed: Margin of supply shall be difference between Sale consideration and Written down Value and
tax to be calculated on such Margin, and where the margin of such supply is negative, it shall be ignored.
2. In other cases: Margin of Supply shall be difference between sale price and purchase price Tax to be calculated on such Margin, and where the
margin of such supply is negative, it shall be ignored;

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PART 2.3 - GST TAX RATES FOR SERVICES RELATED TO MOTOR VEHICLES BUSINESS

2.3.1 FOR PASSENGER TRANSPORT

Transport of passengers by any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service
recipient. – RATE OF TAX 5%

Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of
business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken.
[Please refer to Explanation no. (iv)]

Provided that the Assessee opting to pay tax @ 12% under this entry shall, thenceforth, be liable to pay central tax @ 12% on all the services of Pessenger
Transport supplied by it., if Assessee wish to take full ITC

Passenger transport services other than above. - . – RATE OF TAX 18%

2.3.2 FOR GOODS TRANSPORT

Q1. What service of transportation of goods is exempt under GST?
Services by way of transportation of goods are exempted:
(a) by road except the services of:
(i) a goods transportation agency;
(ii) a courier agency
(b) by inland waterways.
Therefore, the service of transportation of goods by road continue to be exempt even under the GST regime. GST is applicable only on goods transport agency,
GTA.

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Q2. What is the rate of GST on GTA?
Service by a GTA GST rate

Carrying- 0%

 agricultural produce
 milk, salt and food grain including flour, pulses and rice
 organic manure
 newspaper or magazines registered with the Registrar of Newspapers
 relief materials meant for victims of natural or man-made disasters
 defence or military equipment

Carrying- 0%

goods, where consideration charged for the transportation of goods on a consignment transported
in a single carriage is less than Rs. 1,500

Carrying- 0%

goods, where consideration charged for transportation of all such goods for a single consignee
does not exceed Rs. 750

Any other goods 5% No ITC OR 12% with ITC

Used household goods for personal use 0% **

Transporting goods of unregistered persons 0% **

Transporting goods of unregistered casual taxable persons 0% **

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Transporting goods (GST paid by GTA)* 5% No ITC or 12% with ITC

Transporting goods of 7 specified recipients* 12% with ITC (paid by GTA) Or RCM 5% with
ITC

Hiring out vehicle to a GTA 0%

*As per Notification No. 20/2017-Central Tax (Rate) 22nd August, 2017
** As per Notification No. 32/2017- Central Tax (Rate) dated 13th October, 2017

Q3 WHAT is RCM in case of GTA ?

Normally Tax is charged & collected by Supplier of Service provider But in case of GTA , Recipient is liable to discharge TAX LIABLITY UNDER RCM.
Pursuant to the enabling provision stated above, on 28 June 2017 the government specified categories of persons responsible for paying GST under the
reverse charge mechanism.

These categories include:

(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948)
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India
(c) any co-operative society established by or under any law
(d) any person registered under the CGST Act, the Integrated GST (IGST) Act, the State GST (SGST) Act, or the Union Territory GST (UTGST) Act
(e) anybody corporate established, by or under any law
(f) any partnership firm whether registered or not under any law including association of persons
(g) any casual taxable person

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Q4. Who will pay under Reverse Charge?
As per Notification No. 13/2017- Central Tax dated 28/06/2017 the person who pays or is liable to pay freight for the transportation of goods by road in goods
carriage, located in the taxable territory shall be treated as the receiver of service.

Payment is by sender
If the supplier of goods (consignor) pays the GTA, then the sender will be treated as the recipient. If he belongs to the category of persons above then he will
pay GST on reverse charge basis.

Payment by Receiver
If the liability of freight payment lies with the receiver (Consignee), then the receiver of goods will be treated as a receiver of transportation services. If he
belongs to any of the above category of persons, then he will pay GST on reverse charge basis.

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Various Scenarios to Determine Who is Liable to pay GST in case of a GTA

Service Supplier/ Consignor Receiver of goods/ Consignee Person paying Person liable to pay
Provider Freight GST

GTA A company (Whether or not registered under GST) Partnership Firm (Whether or not Company Company
registered under GST)

GTA Partnership Firm (Whether or not registered under GST) Registered Dealer MR. X MR. X MR. X

GTA Partnership Firm (Whether or not registered under GST) Registered Dealer MR. X Firm Firm

GTA A Co-Op Society Ltd (Whether or not registered under Registered Dealer MR. X MR. X MR. X
GST)

GTA A Co-Op Society Ltd (Whether or not registered under Registered Dealer MR. X A Co-Op Society Ltd A Co-Op Society Ltd
GST)

GTA Company A Ltd. (Whether or not registered under GST) Company B Ltd. (Whether or not B Ltd B Ltd
registered under GST)

GTA URD A Registered Dealer MR. X A MR. X

GTA URD A Registered Dealer MR. X MR. X MR. X

GTA URD A URD F F Exempted**

** GTA services to an unregistered person is exempted as per Notification No. 32/2017- Central Tax (Rate) dated 13th October 2017
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