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Chandigarh: Pay VAT on discount, tax dept tells automobile agencies

At present, VAT is charged on the final value of the vehicle.

Written by Vinod Kumar | Chadnigarh |
August 3, 2016 8:10:18 am

THE AUTOMOBILE dealers in the city will now have to pay value added tax (VAT) on the amount of discount offered to customers.

The UT excise and taxation department has passed an order stating that no discounts shall be allowed without payment of corresponding VAT on the sale of vehicles.

Around 50 automobile agencies dealing in cars and two-wheelers operate from Phase I and Phase II of the Industrial Area.

All the dealers give heavy discounts, especially on high-end cars ranging from Rs 5 lakh to 10 lakh, while in other segments discounts between Rs 20,000 and Rs 1 lakh are offered depending upon model of the vehicle.

At present, VAT is charged on the final value of the vehicle.

The department has acted on the grounds that the purchases are being made from the parent companies on inter-state basis and any discount affects the payment of local taxes, causing a loss of revenue to the exchequer and such cannot be permitted.

The order issued by assistant excise and taxation commissioner (AETC) Ravinder Kaushik reads: “This has come to the department’s notice that in many cases the vehicles are being sold to the customers after offering discounts and freebies on the actual purchase price for boosting the sales. This leads to the loss of revenue to the exchequer as no VAT is being paid on all such discounts. This must be treated as most urgent and any deviation would attract action as per the law.”

Tax experts termed the move of the department illegal. Keshav Garg, a chartered accountant, said that in case of automobile agencies, VAT can be charged only on final cost.

Terming the plea taken by the department incorrect, Ajay Jagga, a tax lawyer, said, “It seems the department acted in a haste and the decision was taken without required deliberation.”

Slamming the department, B S Saluja, president, Chandigarh Car Dealers Association, said that the order was against the laid down norms of VAT. “The department wants us not to give discount to customers,” said Saluja, adding that the association would challenge the decision.

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