Dear Sir/ Madam,

Sir our client is in business of Transportation & Construction. Our Clint has purchased Tanker (Vehicle) in year 2008 during that time credit on capital goods was not allowed.

Now my client wants to sale the tanker, so kindly advice us on the same regarding GST on it.

Reply

Dear Sir,

As per Schedule II CGST Act, Para 4(a) transfer of business asset will be treated as supply of Goods. Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for consideration, such transfer or disposal is a supply of goods by the person.

For invocation of above provision three conditions to be satisfied:

1)     Any goods forming part of business assets;

2)     transferred or disposed of so as no longer to form part of business assets; 

3)      by or under the directions of the person carrying on the business

The way this provision is drafted in the act makes its applicability very wide. When above conditions are satisfied GST is payable at the applicable rate for that asset on the value determined under section 15 of CGST Act. It does not matter whether transaction is done for consideration or without consideration, ITC has been availed on those goods or not, Goods belong to pre GST era or post GST era. The Para refers to assets of a business which may be current assets or fixed assets. Therefore this Para applies to both whether capital goods or other goods.

Therefore GST should be charged on sale of old used capital goods.