Planning to Sell Used Machinery or Equipment? Here’s a GST Rule You Must Know!

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🚨 𝗦𝗲𝗹𝗹𝗶𝗻𝗴 𝗨𝘀𝗲𝗱 𝗠𝗮𝗰𝗵𝗶𝗻𝗲𝗿𝘆 𝗼𝗿 𝗘𝗾𝘂𝗶𝗽𝗺𝗲𝗻𝘁? 𝗗𝗼𝗻’𝘁 𝗠𝗶𝘀𝘀 𝗧𝗵𝗶𝘀 𝗚𝗦𝗧 𝗥𝘂𝗹𝗲

If your business is disposing of old capital goods—like machinery, vehicles, or tools—you might be 𝘂𝗻𝗱𝗲𝗿𝗽𝗮𝘆𝗶𝗻𝗴 𝗚𝗦𝗧 without even realizing it.

Here’s the catch:
If you 𝗰𝗹𝗮𝗶𝗺𝗲𝗱 𝗜𝗻𝗽𝘂𝘁 𝗧𝗮𝘅 𝗖𝗿𝗲𝗱𝗶𝘁 (𝗜𝗧𝗖) on that asset when you bought it, 𝗥𝘂𝗹𝗲 𝟰𝟬(𝟮) of the CGST Rules applies. And that changes how GST should be calculated on sale.

🔍 𝗪𝗵𝗮𝘁 𝗗𝗼𝗲𝘀 𝗥𝘂𝗹𝗲 𝟰𝟬(𝟮) 𝗦𝗮𝘆?

When selling capital goods, you’re required to 𝗽𝗮𝘆 𝘁𝗵𝗲 𝗵𝗶𝗴𝗵𝗲𝗿 of the following two:
✅ GST on the sale price
✅ ITC originally claimed, 𝗿𝗲𝗱𝘂𝗰𝗲𝗱 𝗯𝘆 𝟱% 𝗳𝗼𝗿 𝗲𝘃𝗲𝗿𝘆 𝗾𝘂𝗮𝗿𝘁𝗲𝗿 (or part of a quarter) the asset was in use

📊 𝗜𝗹𝗹𝘂𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻
𝗔𝘀𝘀𝗲𝘁 𝘀𝗮𝗹𝗲 𝘃𝗮𝗹𝘂𝗲: ₹100,000
𝗚𝗦𝗧 @𝟭𝟴%: ₹18,000
𝗢𝗿𝗶𝗴𝗶𝗻𝗮𝗹 𝗰𝗼𝘀𝘁: ₹10,00,000
𝗜𝗧𝗖 𝗰𝗹𝗮𝗶𝗺𝗲𝗱 𝗲𝗮𝗿𝗹𝗶𝗲𝗿: ₹1,80,000
𝗛𝗲𝗹𝗱 𝗳𝗼𝗿: 2 years = 8 quarters
𝗜𝗧𝗖 𝗮𝗳𝘁𝗲𝗿 𝗿𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻 (𝟴 × 𝟱%): ₹1,80,000 – 40% = ₹1,08,000

👉 𝗬𝗼𝘂 𝗺𝘂𝘀𝘁 𝗽𝗮𝘆 ₹𝟭,𝟬𝟴,𝟬𝟬𝟬 in GST (not just ₹18,000)

🧾 𝗛𝗼𝘄 𝘁𝗼 𝗛𝗮𝗻𝗱𝗹𝗲 𝗶𝗻 𝗥𝗲𝘁𝘂𝗿𝗻𝘀
𝗚𝗦𝗧𝗥-𝟭:
File the invoice as usual:
– Sale Value: ₹100,000
– GST: ₹18,000

𝗚𝗦𝗧𝗥-𝟯𝗕 / 𝗗𝗥𝗖-𝟬𝟯:
– Add ₹90,000 extra GST under Rule 40(2)
– Report full GST liability: ₹1,08,000

📌 𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆
Always compare 𝗚𝗦𝗧 𝗼𝗻 𝘀𝗮𝗹𝗲 𝘃𝗮𝗹𝘂𝗲 𝘄𝗶𝘁𝗵 𝗮𝗱𝗷𝘂𝘀𝘁𝗲𝗱 𝗜𝗧𝗖, 𝗮𝗻𝗱 𝗽𝗮𝘆 𝘁𝗵𝗲 𝗵𝗶𝗴𝗵𝗲𝗿 𝗮𝗺𝗼𝘂𝗻𝘁.

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