GST on disposal of fixed assets

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Bharat (Querist)
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17 October 2019 I am accountant in a pvt ltd co. We want to dispose an fixed asset motor car cc 1582 which was purchased before GST.
I want to know GST rate applicable, and whether GST applicable of sale value less WDV OR state away on sale value.
I would also like to know if tax invoice needed for this transaction.

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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17 October 2019 if no credit was taken then Sale value - WDV

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Bharat

Bharat (Querist)
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18 October 2019 Thank you Sir, will there be need to prepare tax invoice or only receipt and journal entry suffice to account it. Awaiting

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 When disposing of fixed assets, such as a motor car, under GST, there are several key considerations. Let’s break down the details for your situation:

### 1. **GST Rate on Disposal of Fixed Assets**

**Applicable GST Rate:**
- For the sale of a motor car, the applicable GST rate is 18%. This rate is applicable whether the asset was purchased before or after the implementation of GST.

### 2. **GST Calculation on Disposal**

**Calculation Basis:**
- **Sale Value Basis:** GST is generally applicable on the sale value of the asset. The sale value is the total consideration received from the sale of the asset.
- **Depreciation Adjustment:** GST is not calculated on the difference between the sale value and the Written Down Value (WDV). It is applied on the entire sale value of the asset.

**Example Calculation:**
- **Sale Value of Motor Car:** ₹5,00,000
- **GST @ 18%:** ₹90,000
- **Total Invoice Value:** ₹5,90,000

### 3. **Tax Invoice Requirement**

**Invoice Necessity:**
- **Tax Invoice Required:** You must issue a tax invoice for the sale of the motor car. A tax invoice is required to comply with GST regulations and to ensure that the GST paid on the sale can be properly accounted for.

### 4. **Accounting Entries**

**Accounting for the Sale:**
- **Receipt and Journal Entry:** While a receipt alone is not sufficient for GST compliance, proper accounting entries and a tax invoice are essential.

**Journal Entry Example:**
- **Debit**: Bank Account ₹5,00,000
- **Debit**: GST Output Liability ₹90,000
- **Credit**: Fixed Asset (Motor Car) ₹5,00,000 (or WDV as per books)
- **Credit**: Sale of Asset ₹5,00,000

### Summary

1. **GST Rate:** 18% on the sale value of the motor car.
2. **GST Calculation:** Based on the entire sale value, not the difference between sale value and WDV.
3. **Invoice Requirement:** A tax invoice is necessary to comply with GST regulations.
4. **Accounting:** Issue a tax invoice and record the transaction with appropriate accounting entries.

For accurate compliance, always consult a tax professional or GST consultant, especially if there are specific nuances or complexities in your situation. This will ensure that all GST obligations are met correctly and efficiently.