FBR Proclaims Sales Tax on sale & purchase of used cars

FBR Proclaims Sales Tax on sale & purchase of used cars

A procedure for collection of sales tax on account of sales and purchase of used vehicles has been promulgated by the Federal Board of Revenue (FBR).

In this context, the Board has promulgated and SRO 931(I)2020 to amend Sales Tax Rules, 2006.

In accordance with FBR, the main aim to launch the rules is to collect sales tax on value addition on trading or sales and purchase of used vehicles.

The dealer of the used vehicle is required to deposit sales tax on the differential of sales and purchase-sale of the used vehicle. It is pertinent to mention here that sales tax on the vehicle is already been received both at the manufacturing or import stage.

There is a constraint of input tax adjustment on input tax on vehicles in terms of section 8(1) of the S.T.A. 1990. Lawfully, once the whole element of sales tax on higher/maximum value of sales has already been collected at the import or manufacturing stage.

As per the FBR, as and when a registered person is involved in the transaction of purchasing and selling of used vehicles from the general public, the value of supply shall be chalked out in line with the below formula, described as A-B.

‘A’ is the consideration in money, including all charges and fees but exclusive of the amount of sales tax charged, received by the registered person from the purchaser of the used vehicle.

Formula ‘B’ is the consideration in money, including all charges and fees, paid by the registered person to the seller of the used vehicle. Providing the whole amount paid or received against the above-mentioned transactions is made through the banking channel as required under Section 73 of the Sales Tax Act.

 

If a vehicle is sold at a price lower than its purchase price, the value determined under this sub-rule shall be deemed to be zero.

The FBR apprised that no input tax credit shall be granted to the registered person, which is accredited to any goods or services got for the purposes of selling used vehicles.

 

 

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