GST on Scrap Vehicle Sales & Input Tax Credit Allowed for Transport Use

The Appellate Authority for Advance Ruling (AAAR) determined that the supply of motor vehicles as scrap after usage constitutes a supply in the course or furtherance of business, attracting GST. The sale proceeds from such transactions are taxable income. Initially denied, Input Tax Credit (ITC) on the purchase of motor vehicles used for cash management was later allowed by the AAAR, considering the vehicles as used for transporting goods, not money. The AAAR concluded that ITC on such vehicles is available under the CGST Act, 2017.

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Issues Involved:
1. Whether 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. Whether Input Tax Credit (ITC) is available on the purchase of motor vehicles used for cash management business and supplied post usage as scrap.

Issue-Wise Detailed Analysis:

1. Supply of Motor Vehicles as Scrap:
The Appellate Authority for Advance Ruling (AAAR) held that the supply of motor vehicles, i.e., cash carry vans, as scrap after usage, will be treated as supply in the course or furtherance of business under Section 7 of the CGST Act, 2017. Such transactions would attract GST as the disposal of cash carry vans is a transaction incidental to business. The sale proceeds of such vans are treated as income and reflected in the Profit & Loss Account, marking such transactions as taxable supply attracting GST. However, the rate of GST was not specified due to the absence of invoices or tariff headings provided by the applicant.

2. Input Tax Credit on Purchase of Motor Vehicles:
The AAAR initially denied ITC on the purchase and fabrication of cash carry vans, stating that currency transported by the appellant would not be considered as goods under Section 2(52) of the CGST Act, 2017, which excludes money from the definition of goods. However, the Bombay High Court set aside this decision, directing the AAAR to reconsider the case, considering the appellant’s submissions.

Upon reconsideration, the AAAR examined the context in which the cash carry vans are used. The appellant argued that the currency transported is not used as legal tender but as goods, as they act merely as bailees for their clients. The currency transported cannot be used for any other purpose, thus not fitting the definition of money under Section 2(75) of the CGST Act, 2017. The AAAR concurred with this view, noting that the currency in the context of the appellant’s operations is goods, not money.

The AAAR also noted that Rule 138(14) of the CGST Rules, 2017, which lists goods not requiring e-way bills for transportation, includes currency, indicating that the legislature considers currency as goods in the context of transportation.

Conclusion:
The AAAR concluded that the money transported by the appellant in cash carry vans is considered goods. Consequently, ITC on the purchase and fabrication of these vehicles is available under Section 17(5)(a)(ii) of the CGST Act, 2017, which allows ITC for motor vehicles used for the transportation of goods. The order held that ITC against the GST paid on the purchase and fabrication of motor vehicles used for carrying cash and bullions is available to the appellant.

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