RCM on Metal Scrap, Goods and Services Tax - GST

[VENU K]

Notification 6/2024 has made RCM applicable for Metal Scrap (Chapters 72 to 81). Chapters 72 to 81 talks about different metals like Iron and Steel, Articles of Iron and Steel, Copper and Articles, Nickel and Articles, Aluminium, Lead, Zinc, Tin and other base metals.

Now the question is what will be the RCM liability in the following situations when a registered dealer purchases the following articles from an unregistered customer.

1. Old washing machine in exchange by a washing machine dealer

2. Old gas stove in exchange for a new one by an LPG dealer

3.Old Computer by a computer dealer in exchange

I understand that Scrap is defined under GST tariff Chapter 72

Waste and scrap means

1.All metal waste and scrap

2. Metal goods definitely not usable as such because of breakage, cutting up, wear and other reasons.

Posts / Replies

[Sadanand Bulbule]

Dear Venu

Old computer is E-waste and not metal waste. What made you to doubt the non-applicability of RCM on rest of other metal scrap be clarified?

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Does the query not talk of the issue of 'second hand goods' instead of 'metal scrap'? Are both issues intermingled? Your views please.

[Sadanand Bulbule]

Dear Sir ji

According to me, second hand goods can still be used for the same purpose after due refurbishing. But “scrap and waste” do not carry such  original utility and therefore they have to be disposed of once for all. 

The subject RCM speaks about “ metal scrap” and not second hand goods . So second hand goods are not liable to RCM if they are not sold as “metal scrap”. 
Your comments plz. 

[VENU K]

I feel RCM is applicable in most cases if old goods are exchanged. How far one can classify something as old goods depends on the trade practices. In case of automobiles there is a ready market for used vehicles. This is true to some extend about old but usable furniture also. But in the case of washing machines, old gas stoves, cookers etc they  generally fall into the category of DISPOSALas Scrap. There is no ready market for old washing machines,gas stoves  etc and considering the Indian practice of usage such goods are discarded only when there is no possibility of a salvage. .This is evident from the definition of scrap I quoted in my query. Further who purchases these goods from the dealers is also relevent. Mostly they are sourced by scrap dealers as per my understanding. So the nature of outward supply would be a factor in each case. No one would by a washing machine and in turn sell it to a scrap dealer.

Examination of trade practice has been reiterated by Supreme Court even in case of Safary Retreat judgement.

Computer waste, of course, is E waste as pointed out by Sadanand Bulbule Sir

[Tarun Agarwalla]

https://www.taxmanagementindia.com/visitor/detail_notification.asp?ID=120279

The entry no 6 vis-a vis 8 of RCM notification no 4/ 2017 clearly differentiates the used goods vs scrap goods rad with the definition of scarp 

[(a) Waste and scrap:

(i) all metal waste and scrap;

(ii) metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons.]

there fore IMHO both are way depart. 

[Sadanand Bulbule]

Dear all

For academic purpose, refer the following:

2024 (10) TMI 1420 - APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN - IN RE: M/S. HITESH GWALANI (M/S BABA SUPPLIER)

 

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, The decision of AAAR Rajasthan posted by you is timely and very useful in arriving at correct and fool-proof decision. It makes the picture crystal clear that second hand goods and waste & scrap are entirely different from each other. Either we should talk of second hand goods or metal scrap. The intention of Govt. is to bring only metal scrap into RCM for the purpose of plugging the leaking of revenue payable on final products.

[Sadanand Bulbule]

Dear Sir

In a way, the AAR has validated the points under discussion in broader perceptive.

[KASTURI SETHI]

Agreed, Sir.