TaxTMI 
TaxTMI 
2022 (2) TMI 993
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....dress at A-3, Ashok Vihar, Girdhar Marg. Malviya Nagar, Jaipur Rajasthan (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) given as under: - (a) Classification of any goods or services or both: Further, the applicant being an un-registered person as per the declaration given by him in Form (ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AN INTERPRETATION OF THE APPLICANT: 1. That the business model planned by the applicant involves firstly purchase of old and used cars mostly from the unregistered persons. However, the vehicle can be purchased from the corporates also who are registered under GST. 2. That for the purchase of old and used cars, the applicant will deploy an internal inspection team which will inspects the car and prepare the report which will become the basis of the acquisition cost as one of the component of the purchase price. 3. That registration Certificate (RC) will be a compulsory document required....
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.... shall be in the business of selling old and used refurbished car hence its purchase and related cost of acquisition shall be treated as a profit and loss item from the perspective of accounting and inventory of such acquired old/used refurbished car shall not be treated as fixed asset in the books of accounts. But rather it shall be treated as an inventory / stock item and no depreciation under the provisions of Income Tax Act 1961 shall be charged in the books of accounts or in the Income Tax Return by the applicant. 10. That on the contrary, the applicant shall treat such cost of purchase and cost of refurbishment as "acquisition cost" of the inventory of the old and used refurbished car and will show it at the expense side grouped under "Purchases" in the Profit and loss Account. 11. That applicant does not intend to claim or avail Input Tax Credit of tax charged (if any) on inward supply of motor car (i.e. acquisition) or on refurbishment cost incurred by it. 12. That since the applicant shall be selling old and used refurbished car, hence for the purpose of discharge of Goods and Services Tax on its supply and will not claim any ITC. it is covered by the provisions o....
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....mpanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought under this Act. shall be in respect of,- (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both: (d) admissibility of input tax credit of tax paid or deemed to have been paid: (e) determination of the liability to pay tax on any goods or services or both: (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 4. The applicant submits that the questions for determination in the instant advance ruling application concerns (a) determination of time and value of supply of goods or services or both, which is covered under the said section. 5. Therefore, in the instant case the applicant is eligible to file the present....
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....e market as old and used refurbished motor car only. In fact, if such activity of refurbishment is not done (whose requirements and gravity changes from case to case basis), then the car would not be saleable at all in the market. 7. That in plethora of orders passed by various AARs also it has been held that activities of repairing or cleaning or polishing which does not change the nature of goods would be allowed and the goods sold shall remain used and old goods. Such goods are commonly known as "Second Hand Goods" also in the popular sense. 8. That in fact for valuation of sale of second hand goods under GST, there is specified Rule 32(5) of the CGST Rules 2017 which brings out that minor processing which does not change the nature of goods is carried out on used goods, then they shall remain Second hand goods. The said fact has been tested and affirmed in various AAR orders such as,- a. Attica Gold Pvt Ltd 2020 (36) G.S.T.L. 445 (A.A.R. - GST - Kar.) b. Shambhu Traders Pvt Ltd 2019 (23) G.S.T.L. 293 (A.A.R. - GST) 9. That also without prejudice to the above, the wordings used in the Table in Column (3) of Notification No. 08/2018-CT(Rate) dated 25-01....
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....hose words in their natural and ordinary sense. This rule of interpretation is followed in plethora of judgments. A few of the judgments are as under:- a. Nelson Metis v. Union of India (AIR 1992 SC 1981) b. Gurudevantt VKSSS Maryadit v. State of Maharashtra (AIR 2001 SC 1980) c. Swedish Match AB v. Securities and Exchange Board of India (AIR 2004 SC 4219) 12. That now, since the explanation to the said notification defines margin in both the scenarios i.e. when depreciation under the IT Act 1961 has been claimed on the motor cars to be sold or when depreciation under the IT Act 1961 is not claimed on the motor cars to be sold, hence same needs to be referred in given case. 13. That it is pointed out that whether depreciation is to be claimed under the provision of Section 32 of the IT Act 1961 upon a motor vehicle is dependent upon the fact that whether such motor vehicle has been treated as a fixed asset or not by the person claiming the benefit of given notification. 14. That whether a motor vehicle is a fixed asset or not, depends upon the facts and circumstances of each case. Only in the cases where the motor vehicle has been acquired with a....
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....ant, the holding period of such asset is never anticipated and intended to be of more than a year. In fact, the applicant and other such players of the trade intend to possess the motor vehicle only for the purpose of display and as an inventory i.e. procurement and refurbishment for the purpose of selling it further and to earn margin. 20. That further the cost of refurbishment is directly related to the appreciation in the sale value and in turn margin of the applicant on which it is liable to pay the tax. The more and better the cost of refurbishment, the higher the margin and in turn higher the tax to the exchequer. It has already been stated in the facts of the advance ruling that applicant is required to undertake the various types of cost at the time of refurbishment and same will be done by the professional who analyses the requirement and components of the refurbishment. 21. That in fact the registered persons covered by the provisions of explanation (i) to the notification i.e. who claim depreciation under the IT Act 1961 on cost of motor vehicle generally supplies such used and old motor vehicle to the persons like the applicant in given case who only procure the u....
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....meaning of a word is not given in the statue its contextual meaning needs to be understood to interpret the provision of the law. 26. That in this background, it is pointed out that there is an undisputed fact that applicant will be engaged in the business where it will procure old and used cars, refurbish it and then sell it as old and used second hand refurbished car. The refurbishment activity on the car is the essential ingredient of the business of the applicant. If it will not undertake the same or will not have competence to do so, then it cannot survive in the business at all. Further the cost of such refurbishment is not standard and will depend upon the condition of the car and the judgment of the applicant. 27. That further, when the car will be sold in the market to the customer, the said customer shall be made aware in advance the various types of the refurbishment activities which have been undertaken on such car. The customer will be made aware about necessary corrections and activities which have been undertaken to ensure the car is usable and the customer shall be able to reap its benefit while using the same. Hence in the open market it is very evident betwe....
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....Act and also in the Central Sales Tax Act or in any of the sales tax laws made in the several States, the definition includes the sale of goods, and not to the purchase of goods. That must be so because the sale of a commodity must include within its ambit the concept of sale as well as purchase. It is not possible to conceive of a sale of goods without a buyer. 32. That thus on basis of above it is evident that meaning of sale can be used as inference to arrive at meaning of purchase. In fact, normal meaning of the word 'purchase' is acquisition for money or for any consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings "buy, acquire", another meaning given to the word "purchase" is "procure". The word "procure" consists of much wider import than the word "purchase". In the same dictionary, the word "procure" has been given the meaning as "obtained by care or effort acquire". 33. That on reading of above, it is evident that purchase includes making an effort to bring goods to a location and condition where they are for use or for onward sale. 34. That in fact the given concept of sale price and purchase price also cor....
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....st of purchase of used refurbished goods. 40. That after refurbishment all the necessary items which will be added or fitted to the motor car will form pan of the sale price of the motor car. In fact, the applicant shall not charge any thing over and above such sale price which shall be agreed with the customer. In reality such sale price shall include the price charged towards the car and directly attributable cost towards the preparing such car in a manner that it is purchased by the customer. 41. That now when as per explanation (ii) to the notification, difference is required to be taken between the sale price (which includes the recovery towards the car. refurbishment cost and margin), the comparable purchase price shall include the cost of car and the refurbishment cost. Then only in true and real sense the tax shall be payable on the margin. 42. That if only purchase cost of car is considered as purchase price for the purpose of calculating margin and whereas for calculating sale price the value of total amount including the refurbishment recovery is also considered then the margin derived from such method shall be faulty and will lead to double taxation. 43. Tha....
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....with the subject matter of the statute or statutory instrument understand it. 47. That by drawing inference from the same, concept of price is not prevalent under GST. However. the concept of ITC on inward supplies is prevalent and tax is based on the philosophy of value addition. Further the notification also clearly brings out that tax is payable on margin. Hence in given case, the margin to be earned by the applicant shall be fully reflected only when deduction of refurbishment cost is given along with other procurement cost from selling price. Hence in light of the spirit of given notification the cost of refurbishment is required to be included in the purchase price as mentioned in the notification. 48. That similar view has been held in case of Indian Oil Corporation vs State of Assam and Ors reported in 2007 11 SCC 693 where it was held that:- A. Sales Tax "Double taxation" "Determination of" Resolution of Government dated 16-12-1977 requiring a dealer to sell products at prices fixed by Government which included "surcharge" to be collected from dealers and deposited in "oil pool account" "Appellant Company purchasing petroleum products from a refinery and pay....
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....cturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. (2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. (3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. 50. That in case of applicant, the quality of old and used refurbished car is governed by Section 16(3) of the aforesaid Act wherein the applicant shall be bound to make available and old and used by working car to the ....
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....curred for the refurbishment of the said car are includible in the purchase price so as to deduct the same from the selling price of the old and used refurbished car arrive as the margin for the purpose of valuation and levy under Notification No. 08/2018-CT(Rate) dated 25.01.2018. Notification No. 8/2018-C.T, (Rate), dated 25-1-2018 reads as under: - In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the central tax on intra-state supplies of goods, the description of which is specified in column (3) of the Table below, falling under the tariff item, sub-heading, heading or Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are given in corresponding entry in column (2), from so much tax as specified in Schedule IV of Notification No. 1/2017-Central Tax (Rate), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4), of the said Table, on the value t....