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of <h1>Composition Dealers' Tax Liability on Scrap Vehicle Purchases from Unregistered Dealers Clarified</h1> <h3>In Re: M/s. Ahmedraza Abdulwahid Munshi (Nadim Scrap)</h3> In Re: M/s. Ahmedraza Abdulwahid Munshi (Nadim Scrap) - 2022 (59) G. S. T. L. 346 (A. A. R. - GST - Guj.) Issues:1. Whether a Composition Dealer can purchase Scrap/Used vehicles from Unregistered Dealers and if Reverse Charge Mechanism (RCM) is applicable.2. Is there an exemption limit for RCM on the purchase of Scrap and Used vehicles from unregistered dealersRs.Analysis:Issue 1: The Commissionerate of CGST Rajkot clarified that under Section 9(3) of the CGST Act, 2017, tax on reverse charge basis is applicable for the supply of used vehicles, seized goods, old goods, waste, and scrap if the supplier is a government entity. However, if the registered person purchases the scrap/used vehicle from unregistered dealers, then they are not liable to pay tax under reverse charge. This exemption is based on specific categories of goods/services mentioned in the relevant notifications.Issue 2: Regarding the exemption limit for RCM, it was explained that under Section 9(4) of the CGST Act, 2017, an exemption was provided for supplies received from unregistered suppliers up to a certain limit. However, subsequent amendments and notifications have clarified that there is no RCM tax liability for the purchase of goods like scrap and used vehicles from unregistered dealers. Therefore, there is no specific exemption limit applicable in this scenario.Findings: The Authority for Advance Ruling emphasized that the provisions of the CGST Act and GGST Act are similar unless specifically mentioned otherwise. They referred to relevant sections of the CGST Act and notifications to support their ruling. The notifications specified that tax on reverse charge basis is applicable for certain categories of goods supplied by government entities, but there is no RCM tax liability for purchases from unregistered dealers.Ruling:1. Composition Dealers purchasing Scrap/Used vehicles from government entities are liable to pay tax on reverse charge basis.2. There is no RCM tax liability for the purchase of Scrap and Used vehicles from unregistered dealers based on the current notifications and provisions of the CGST Act.
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