Facts:Applicant is engaged in provision of cash management services, wherein the cash is transported through security vans called cash carry vans. When these vans become old or cannot be used, Applicant sells these motor vans as scrap.
- Whether sale of motor vehicles as scrap after its usage can be treated as “Supply” and whether GST is applicable on the same?
- What is the rate of GST applicable on sale of Motor Vehicles as Scrap?
- Whether ITC can be available on purchase of Motor Vehicles?
a. The disposal of the cash carrying vans is a transaction in connection with or incidental or ancillary to their business. Buying new assets and discarding the old and unusable assets is an activity in the course of carrying on of the business. Further rejecting the contention of the Applicant regarding the submissions on Schedule I, the authority held that Schedule I is for activities to be treated as supply even if made without consideration, whereas in the instant case the transaction is made for a consideration and the activity does not fall under the category of Schedule I.
b. Rate of tax,
- i. If the Motor Vehicle is sold as scrap, the rate of GST on the material sold as scrap would be applicable.
- ii. If the Motor Vehicle is sold as a Motor Vehicle, the rate has to be decided in accordance with Notification 1/2017-Central/State (Rate) and Notification No. 1/2007-Compensation Cess (Rate).
c. On ITC eligibility: the same was examined on two parameters independently
i. One is the eligibility by way exception u/s. 17(5)(a)(i)(A) of CGST Act, 2017 which specifies that ITC is eligible when they are used for making further supply of such vehicles or conveyance. The word “further” before the word supply has to be given proper weightage. The use of word “further” is indicative of a further supply and not disposal as scrap and which happens after the motor vehicle has been used till it’s full working life. In the instant case, since the disposal of Motor Vehicle as scrap is not for making the further supply, the exception to sub-section 17(5)(a)(i) is not applicable.
ii. Other parameter is that exception u/s. 17(5)(a)(ii) of CGST Act, 2107 ITC which specifies that is eligible when they are used for transportation of goods.
As per Sh. Borhade, Member: The contention of the Applicant that currency is goods as per rule 138(14) of the GST E-Way Rules is acceptable since Notes become legal tender after they are issued by Reverse Bank of India. Till the time they are mere printed papers and not money and is rightly covered under the definition of the word “goods”.
As per Sh. Pankaj Kumar, Member: Cash Carry Vans are engaged for transportation of Cash. Cash is the Indian legal tender and money has been excluded from the definition of the work “goods”. Since transportation of money is not covered under Sub-section 17(5)(ii) of CGST Act, 2017, ITC is ineligible.
As the members of the authority differ in respect of above aspect of ITC, appropriate reference is made to the Appellate Authority for Advance Ruling for hearing and decision
Comments: This ruling held that vehicles which were earlier used for main business and subsequent disposal of the same as scrap or otherwise also falls within the definition of “Business” and becomes the supply liable for GST. As regards to the question of whether ‘currency/money’ is ‘goods’ for the purpose of Sec. 17, ibid stands referred to the appellate authority.
In Re: CMS Info Systems Limited–– 2018-TIOL-21-AAR-GST