A Pvt. Ltd. Company is a used Car dealer. Most of the Purchases are from individuals and re-sold to individuals.Most of the transactions takes place within TamilNadu. By Notification No. II (1) / CTR / 30(a-5) / 2007 -G.O. Ms.No.79 dated 23.3.07) -w.e.f - 1.1.07 the rate of tax for Used cars on value addition without input tax credit is 4% at present. What does the term 'Value addition" denotes? Does it connote the difference between the purchase price and sales price (or) actual cost incurred in making good the car for running condition?
30 August 2010
Since the first sale has already suffered tax and the dealer is not eligible for set off on resale, since the individual selling the car will not be registered under VAT.
Therefore valueaddtion refers to the difference between the purchase price and sales price,(margin earned on resale) which would be subject to tax of 4%
In case the seller is a company selling its assets (car) then they may levy vat, still this would not be available as input credit in terms of the above notification and such vat will become a part of the sale value plus his margin
CAclubindia
