The Authority for Advance Rulings (AAR), Mumbai recently ruled that supply of motor vehicles as scrap after its usage can be treated as ‘supply’ in the course or furtherance of business and that GST would be applicable on such transaction.
The applicant, CMS Info Systems Limited, provides cash management services in India. it is engaged in managing cash circulation through transporting cash from currency chests to bank branches. The transportation is facilitated using security vans popularly known as cash carry vans. The applicant purchases raw motor vehicles and gets it converted into cash carry vans. The applicant pays GST on fabrication as well as on purchase of such motor vehicles. The credit of such GST is not availed. In the pre-GST era, the applicant had paid Central Excise Duty and Value Added Tax. when the vans cannot be used further, the applicant sells these motor vehicles as scrap.
The issue sought for clarification before the Authority is whether the supply of motor vehicles as scrap after its usage can be treated as ‘supply’ in the course or furtherance of business and whether such transaction would attract GST.
The Authority comprising of Members B.V. Borhade and Pankaj Kumar found that the disposal of cash-carrying vans is a transaction in connection with or incidental or ancillary to the business of having a cash management network. “As and when the vehicles become scrap, they have to be disposed off and the proceeds therefrom to be identified as income for the business which is reflected in the Profit & Loss Account of the business. Buying new assets and discarding the old and unusable assets is an activity in the course of carrying on of the business. Hence we conclude that supply of such motor vehicles as scrap after its usage is an activity of ‘supply’ in the course or furtherance of business and such transaction would attract GST.” observed the members.
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