Purchasing Scrap/Used vehicles by Composition Dealer shall be covered under RCM in GST
Fact and Issue of the case
The comments/reply with respect to the questions asked by the applicant are as under:
(a) As regards the first question, the Composition Dealer can purchase scrap/used vehicles from the unregistered dealer. Further, if a registered person receives/purchases the scrap/used vehicle from the supplier that is Central Government, State Government, Union territory (or) local authority, then the recipient is liable to pay tax under reverse charge under Notification No. 36/2017-Central Tax(Rate) dated 13-10-17. However, if the registered person receives/purchases the scrap/used vehicle from unregistered dealers, then the recipient is not liable to pay tax, as it is not covered under specific categories of goods/services mentioned in Notification No.07/2019-Central Tax(Rate) dated 29-3-19.
(b) As regards the second question, the recipient is not liable to pay GST under reverse charge with respect to purchase of goods viz. scrap and used vehicles from unregistered dealers and therefore exemption limit for such purchase does not arise.
Observation of the Authority
At the outset authority would like to make it clear that the provisions of CGST Act and GGST Act are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the GGST Act.
Authrity has carefully considered all the submissions made by the applicant. We draw our attention to relevant sections of CGST Act and Notifications issued in this regard. Vide Section 9(3) of CGST Act, Government may specify the categories of supply of goods or service or both on which the tax shall be paid on reverse charge mechanism by the recipient. In exercise of powers of section 9(3) of CGST Act, The Central Government specifies at The Sr no 6 to Notification No.4/2017-Central Tax(Rate) dated 28-6-17,central tax shall be paid on reverse charge basis by the recipient as follows:
|Sr.No.||Tariff item, sub-heading, heading or Chapter||Description of supply of Goods||Supplier of goods||Recipient of supply|
|06||Any Chapter||Used vehicles, seized and confiscated goods, old and used goods, waste and scrap||Central Government, State Government, Union territory or a local authority||Any registered person|
Sr.No.06 above was inserted vide Notification No.36/2017-Central Tax(Rate) dated 13-10-17.
Vide Section 9(4) of the CGST Act, Government may specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both. Notification No.08/2017-Central Tax(Rate) dated 28-6-17 exempts intraState supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the CGST Act, 2017 (12 of 2017) provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day. The aforementioned notification has been amended vide Notification No.38/2017-Central Tax(Rate) dated 13-10-17 vide which the proviso to the Notification (mentioned in para above) has been omitted. Further, Notification No.7/2019-Central Tax(Rate) dated 29-3-19 notifies that the specified registered persons shall, in respect of supply of goods or services or both, received from an unregistered supplier shall pay tax on reverse charge basis as recipient of such goods or services or both. However, subject goods are not notified vide said Notification 7/2019-CT(R).
The Authority for advance ruling concluded as follows:
a. Composition Dealer purchasing Scrap/Used vehicles from the following Suppliers, namely: Central Government, State Government, Union territory or a local authority are liable to pay tax on RCM basis.
b. There is no RCM tax liability for purchase of subject goods from unregistered dealers
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