AAR : Pre-delivery registration, handling & insurance charges to make vehicle 'road worthy', liable to VAT

AAR holds that registration, insurance and handling charges received and paid on behalf of customer of motor vehicle are includible in ‘sale price’ thereof in terms of Section 2(25) of Maharashtra VAT Act, under the deeming fiction that “any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof”; Consequently, observes that “pre-delivery charges are brought within the meaning of the expression “sale price” and even if a sale has taken place, but delivery has not been taken, all pre-delivery charges would form part of the sale price”, while drawing inference from SC ruling in case of KTC Automobiles; Explains that motor vehicle remains in the category of ‘unascertained’ or ‘future’ goods till its appropriation to the contract of sale and sale gets concluded only upon compliance with stipulated conditions to make it road worthy in terms of Motor Vehicle Act, accordingly, “possession of a motor vehicle passes or can pass legally to the purchaser only after obtaining valid registration under the Motor Vehicles Act and the purchaser gets entitled to use the vehicles in public places”; However, holds that tax liability on handling or service charges related to registration shall be protected for the period July 11, 2011 to January 29, 2016 considering that Bombay HC decision in Sehgal Autoriders Pvt. Ltd. which held that such charges were not liable to VAT, was subsequently reversed by Apex Court in KTC Automobiles; Relying on various judicial precedents, AAR holds that reimbursement of discounts offered to customers by automobile company shall form part of ‘sale price’, while allowing input tax credit of motor vehicles used as ‘Demo Vehicles’ provided that they are not capitalized  : AAR