VAT on pre-owned cars under PVAT is on a dealer of pre-owned cars only and not on every person

Recently Punjab Govt has imposed VAT on sale of pre owned cars by a dealer vide notification No. S.O. /P.A. 8/2005/S.8/2011 . the relevant extract of the notification is being produced herebelow:

   In the said schedule ‘E’, after serial No.9, and the entries relating thereto the following shall be added, namely:-


   ‘’10 (a) Pre-owned cars having engine       Rs.3000/-      per car on the first
                        Capacity not exceeding 1000cc.                               sale, by a dealer
liable to pay
tax under this Act.


          (b) Pre-owned cars having engine       Rs.5000/-         per car on the first
               Capacity  exceeding 1000cc.                                    sale, by a dealer
  liable to pay tax
  under this Act.”          
 
From the above entry in schedule E it is clear that tax on pre-owned cars has to be paid by a dealer registered under the Act(i.e Punjab VAT Act, 2005). A question was asked to me whether the word dealer as mentioned in the above entry of schedule E means the dealer registered under the PVAT Act who is dealing in pre-owned cars or every person registered under the Punjab VAT Act irrespective of the fact whether he is dealing in pre-owned cars or not.

During the period when pre-owned cars were not tax free under Punjab VAT Act, it was seen that during assessment VAT was also ussualy demanded from every person on the sale of his personal car standing in his books of accounts, treating such sale of car as sale of  pre-owned car.

After the above amendment tax on pre-owned cars have been imposed on a dealer registered under the Punjab VAT Act. It should be noted that the word dealer has not been defined anywhere in the Punjab VAT Act, 2005. The word used for person holding VAT registration is the Taxable Person and for the person holding TOT registration the Registered Person.

Hence in the absense of any definition of dealer it must be understood in general terms.  The word dealer used in the above entry of schedule E should mean the dealer in the pre-owned cars who is registered under the Punjab VAT act and not every Taxable or Registered person under PVAT Act.

Thus if any person who is not a dealer of pre-owned cars, he is not required to pay VAT on such sale of his car under the above entry of schedule E.


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