1. How to calculate margin on sale of second hand goods? Whether
A) Margin = Sales price – Purchase price OR
B) Margin = Sales price – (Purchase price + Processing cost)
For ex: We purchased a second hand car for Rs 10, 00,000/-. Incurred minor processing cost of Rs 50,000/- and sold the car for Rs 12, 00,000/-.
In this case whether margin will be Rs 2,00,000/- (12,00,000-10,00,000) or Rs 1,50,000/- (12,00,000- [10,00,000 + 50,000])?
If B is correct we cannot claim Input Tax Credit on processing cost incurred but if A is correct can we claim Input Tax Credit on processing cost incurred?
2) Whether tax is to be calculated on margin or the margin is inclusive of tax?
For ex: We purchased a second hand car for Rs 10, 00,000/- and sold it for Rs 12, 00,000/-. The margin is Rs 2, 00,000/-. In this case whether tax amount will be Rs 36,000/- (2, 00,000*18%) or it will be Rs 30,508/- (2, 00,000*18%/118%)?
3) Input Tax Credit
Can we claim Input Tax Credit on other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc.?
4) If in F.Y. 2019-20 our total margin on sale of second hand goods is below Rs 1.5 crores and total sale value of second hand goods is above Rs 1.5 crores can we opt for composition scheme for F.Y. 2020-21 as in F.Y. 2019-20 our total margin will be less than Rs 1.5 crores