2018 (5) TMI 649 - AAR - GST

Scope of Supply - supply of such motor vehicles as scrap after its usage - Whether supply of such motor vehicles as scrap after its usage can be treated as supply in the course or furtherance of business and whether such transaction would attract GST? - rate of GST and/or Compensation Cess. Held that - The disposal of the scrap vehicles for consideration is a sale and section 7 explaining the expression supply covers supply of goods such as sale or disposal made for a consideration. Section 7, further, says that the supply has to be in the course or furtherance of business - The disposal of the cash carrying vans is a transaction in connection with or incidental or ancillary to the business of having a cash management network. As and when the vehicles become scrap, they have to be disposed off and the proceeds therefrom to be identified as income for the business which is reflected in the Profit & Loss Account of the business. Buying new assets and discarding the old and unusable assets is an activity in the course of carrying on of the business. There is a supply of cash vans, which are goods , for a consideration and the transaction is in the natural course of business. The transaction and the provisions are obvious - supply of such motor vehicles as scrap after its usage is an activity of supply in the course or furtherance of business and such transaction would attract GST. Rate of GST and Compensation Cess - Held that - whether the vehicles are sold as scrap and unusable OR sold as old vehicles is not found confirmed from any document. It is generally seen that there is surrender of the RTO Registration Book when the vehicles are disposed off as scrap. Hence, it needs to be ascertained as to whether the vehicles are sold as scrap. For vehicles sold as scrap which does not amount to sale of a vehicle as such, the rate of the material sold as scrap would apply - In absence of the requisite details, the applicant are directed to go through the N/N. 1/2017-CentraI/State Tax (Rate) and N/N. 1/2017-Compensation Cess (Rate), as amended from time to time. Ruling - The question is answered in the affirmative. As regards rate of GST and/or Compensation Cess, the details being inadequate, the applicant may refer to the Notification No. 1/2017-CentraI/State Tax (Rate) and Notification No. 1/2017Compensation Cess (Rate), as amended from time to time. Input tax credit - whether Input tax Credit is available to CMS Info Systems Ltd. on purchase of motor vehicles i.e. cash carry vans which are purchased, used for cash management business and supplied post usage as scrap? - Difference of opinion - Held that - As the Members of the Advance Ruling Authority differ in respect of this question as raised by the applicant, appropriate reference is made to the Appellate Authority for Advance Ruling for hearing and decision on this question - matter referred to Appellate Authority for Advance Ruling.

Summary

Issues Involved:

1. Whether the supply of motor vehicles as scrap after usage can be treated as 'supply' in the course or furtherance of business and whether such transaction would attract GST.
2. If the answer to the first question is affirmative, whether Input Tax Credit (ITC) is available on the purchase of motor vehicles (cash carry vans) used for cash management business and supplied post usage as scrap.

Issue-wise Detailed Analysis:

Issue 1: Supply of Motor Vehicles as Scrap

The applicant sought clarity on whether the supply of motor vehicles as scrap after usage qualifies as 'supply' under GST law and if it attracts GST. The ruling referred to Section 7 of the GST Act, which defines 'supply' as including all forms of supply of goods or services for consideration in the course or furtherance of business. The disposal of cash carry vans as scrap was deemed a sale, and thus a supply under Section 7, as it is a transaction incidental to the applicant's business of cash management. The transaction qualifies as 'supply' because it involves the disposal of business assets for consideration, reflecting income in the business's profit and loss account. Therefore, the supply of motor vehicles as scrap after usage is a supply in the course or furtherance of business and attracts GST. The exact rate of GST and Compensation Cess depends on whether the vehicles are sold as scrap or as old vehicles, which requires further details.

Issue 2: Availability of Input Tax Credit (ITC)

There was a difference of opinion among the members regarding the availability of ITC on the purchase of motor vehicles used for cash management and later supplied as scrap.

View of Member Sh. Borhade:

Sh. Borhade opined that ITC should be available. He referred to Section 17(5) of the GST Act, which restricts ITC on motor vehicles except when used for specific purposes, including transportation of goods. He argued that 'goods' in this context should include 'money' as per the Motor Vehicles Act, where 'goods' includes anything carried by a vehicle except living persons. He also referenced the GST E-Way Rules, which treat 'currency' as goods for transport purposes. Thus, he concluded that the motor vehicles used for transporting cash (considered as goods) qualify for ITC under the exception provided in Section 17(5)(a)(ii) of the GST Act.

View of Member Sh. Pankaj Kumar:

Sh. Pankaj Kumar disagreed, stating that ITC is not available. He emphasized that 'money' is explicitly excluded from the definition of 'goods' under Section 2(52) of the GST Act. He argued that the legislative intent is clear in excluding 'money' from 'goods,' and thus transportation of money does not qualify for the ITC exception under Section 17(5)(a)(ii). He also pointed out that the exclusion of 'currency' from e-way bill requirements supports this interpretation. Therefore, he concluded that ITC on motor vehicles used for transporting money is not available.

Conclusion:

Question 1: The supply of motor vehicles as scrap after usage is treated as 'supply' in the course or furtherance of business and attracts GST. The exact rate of GST and Compensation Cess depends on further details about the sale.

Question 2: There is a split decision. Sh. Borhade opined that ITC is available, while Sh. Pankaj Kumar opined that it is not. Due to the difference in opinion, the matter is referred to the Appellate Authority for Advance Ruling for a final decision.