2018 (5) TMI 649 - AAR - GST

GST on Scrap Motor Vehicle Sales: Input Tax Credit Dispute

The supply of motor vehicles as scrap after usage is considered a 'supply' in the course or furtherance of business, attracting GST. The rate of GST and ... Scope of supply - business (for supply) - permanent transfer or disposal of business assets - treatment of money/currency as goods for GST purposes - input tax credit - motor vehicles and other conveyances (blocked and exceptions) - transportation of goods (ITC exception)Scope of supply - business (for supply) - permanent transfer or disposal of business assets - Whether disposal of used cash carry motor vehicles as scrap constitutes a 'supply' in the course or furtherance of business and is liable to GST - HELD THAT: - The Authority found that disposal of used cash carry vans as scrap is a sale/disposal for consideration and falls within the definition of 'supply' under the GST Act when made in the course or furtherance of business. The vans are assets employed in the applicant's cash management business; their disposal on becoming unusable is an activity incidental or ancillary to that business and the proceeds are reflected in business income. Schedule I and II were considered: Schedule I lists activities treated as supply even without consideration, and Schedule II classifies activities as supplies of goods or services; but here the transaction is a sale for consideration in the ordinary course of business. On the available material the Authority therefore held the transaction attracts GST, and advised the applicant to determine applicable tariff/cess by reference to the rate notifications.Disposal of used cash carry motor vehicles as scrap is a 'supply' in the course or furtherance of business and is taxable under GST; applicant to refer to rate notifications for applicable GST/compensation cess.Input tax credit - motor vehicles and other conveyances (blocked and exceptions) - transportation of goods (ITC exception) - treatment of money/currency as goods for GST purposes - Whether input tax credit is available on purchase of cash carry motor vehicles used in the applicant's cash management business and subsequently disposed as scrap - HELD THAT: - The Authority recorded divergent conclusions by its Members. One Member held that the cash carry vans are used for transportation of 'goods' (noting carriage of bullion and construing 'goods' in section 17(5)(a)(ii) contextually so as not to exclude currency when used in the applicant's business) and therefore input tax credit on purchase of such vehicles would be available subject to rules. The other Member held that 'money' is expressly excluded from the statutory definition of 'goods' and that the legislative scheme and exclusions (including e way/other provisions) indicate Parliament intended a restrictive scope for the ITC exception; accordingly ITC would not be available for vehicles used to transport money. Because the Members differed on this legal question, the matter was referred for decision to the Appellate Authority for Advance Ruling.Divergent views recorded; the question of eligibility for input tax credit on cash carry vans is not finally decided and is referred to the Appellate Authority for Advance Ruling.Final Conclusion: The Authority ruled that disposal of used cash carry vans as scrap is a taxable supply under the GST Act. The question whether input tax credit on purchase of such motor vehicles is admissible was left undecided by this Authority due to differing opinions of its Members and is referred to the Appellate Authority for Advance Ruling. 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 ScrapThe 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.