Buying car in one city, sending it to another without completing GST formalities could spell trouble

If you want to buy a car in one city and transfer it to another then ensure that it is done after the e-Way bill and all GST formalities are completed, else there is a possibility that your new car will be seized by the tax authorities and you may end up paying a penalty.

This follows a ruling by the Kerala High Court in a matter where Vishnu Mohan from Thiruvananthapuram went to Puducherry and purchased a car from a dealer. The buyer got the vehicle temporarily registered in Puducherry and entrusted it to the dealer to transport it to Thiruvananthapuram on payment of transport charges. I-GST (Integrated Goods and Services Tax) was charged on transport charges. However, the car was detained in Kerala.

The detention was made on three grounds — the consignment is an inter-State supply of goods being more than ₹50,000 which makes e-Way bill mandatory, temporary registration at Puducherry was seen with suspicion and compensation cess was collected at 20 per cent instead of 25 per cent.

Since rules prescribe release only after payment of penalty, a notice was served. Both the buyer and the dealer approached the Court and argued that the said transportation was caused by unregistered person and accordingly, e-Way bill requirement should not arise under K-SGST (Kerala State GST) Rules.

Transportation, e-Way bill

The petitioners also submitted that the matter involved transportation of ‘used personal and household effects’ hence there is no requirement to generate e-Way bill. But the tax authorities contended that the said vehicle is not a used vehicle. In the instant transaction, the dealer could not have completed the transaction of selling the car until it is delivered to the purchaser at the agreed destination.

The Court ruled that if the conditions under the Act and Rules are not complied with, Section 129, which talks about confiscation of goods, will apply. The petitioners are entitled to adjudication, but they will have to prove that the goods being transported stand exempted from the rigours of the GST regime, it said.

However, it restrained itself from deciding whether the purchase of the car was a completed intra-State sale and that only transportation was an inter-State event. Further, it did not comment on the fact whether such vehicle was ‘used personal and household effects’ and e-Way bill would apply. It held that all these questions shall be decided by the adjudication authorities. Since there has been interim custody of the goods, the court advised that the petitioners can follow that procedure and secure the interim custody of the goods.

Experts feel that it would be imperative to know what the GST compliance requirements are before buying cars from outside the State. “The ruling accentuates the fact that everyone needs to understand the e-Way bill requirements under GST before causing any movement of goods of more than ₹50,000,” Harpreet Singh, Partner in KPMG, said.

According to him, though the Court has restrained to analyse whether e-Way bill is required where individuals entrust the goods with the dealer for transportation to another destination, “it clearly lays down that authorities are within their powers to invoke confiscation provisions under GST law even in case of minor infraction of law.”

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