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Sale of Old Computer
Facts
Computer (used for business purpose & on which no ITC has been taken yet) given free of cost to unrelated person based in Kerala.
[Purchased 2 years’ back at a price of Rs. 1,12,100 (including GST). Open market value is Rs. 75,000.]
Qns: Whether it is a Taxable Supply.
Answer: No (For Explanation, please refer Next Section)
Additional Qns: If it is provided to Related Party at Free of Cost. What would be the Tax Treatment.
Answer: Taxable, GST needs to be paid on the value of Rs. 75,000.
Additional Qns: If it is provided to Related Party at Rs.40,000. (Related Party is eligible for full ITC on this computer). What would be the Tax Treatment.
Answer: Taxable, GST needs to be paid on the value of Rs. 40,000.
Additional Qns: If it is provided to Related Party at Rs.40,000. (Related Party is not eligible for full ITC on this computer). What would be the Tax Treatment.
Answer: Taxable, GST needs to be paid on the value of Rs. 75,000.
Additional Qns: If ITC would have been availed and provided free of cost. What would be the Tax Treatment.
Answer: Amount needs to be paid equal to Rs. (17100(GST Component on purchase)-20%*2)= Rs. 10,260
Additional Qns: If ITC would have been availed and Sold for Rs.80,000 . What would be the Tax Treatment.
Answer: Rs.14,400
Amount needs to be paid equal to Rs. (17100(GST Component)-20%*2)= Rs.10,260
or
GST on Rs. 80,000*18% i.e. Rs. 14,400,
which ever is higher
Explanations
Above questions are related to three concepts which are discussed below:
Section-7 (Supply) read with Schedule-I:
In case of sale of Computer Free of Cost, except for following two situations, it will not be considered as supply:
a. When it is provided to the Related Person.
b. When ITC has been availed on such Computer.
Accordingly, where ITC has not been availed,
In case of free of cost provision of computer to the unrelated person, it will not be considered as Supply.
Whereas, in case it is provided to Related Persons, it will be considered as Supply. For Valuation, we need to refer Rule 28 as discussed below:
Rule 28 (Key Points)
In case, Related Persons (Recipient) is eligible for Full ITC against such supply, the value adopted by the Supplier will be considered.
In case, Related Person is not eligible for Full ITC, Value needs to be decided in following manner: a. Open Market Value b. In case OMV is not available, Value of Like & Kind c. In case Value of Like & Kind is also not available, Cost plus 10%, d. In case, Cost+10% is not available, Best Judgement Value using reasonable means.
Accordingly, above questions have been answered.
Section 18 (6) (Where ITC has been availed)
In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed (i.e. 5% for each quarter) or the tax on the transaction value of such capital goods or plant and machinery determined under section 15 , whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15 .
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