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July 1, 2020

Maharashtra AAAR allow ITC for companies using vehicles to transport cash to ATM’s

by Rubina Dsouza in GST, Legal Court Judgement

Maharashtra AAAR allow ITC for companies using vehicles to transport cash to ATM’s


Input Tax Credit (ITC) basically means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax. According to Section 16(1) of the CGST Act, Every registered taxable person shall, subject to such conditions and restrictions as may be prescribed and within the time and manner specified in section 44, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. Section 17(5) pertains to blocked credit under CGST Act which states the situations where input tax credit shall notbe available. A person cannot avail ITC wherein the given motor vehicle is used to transport people and has a seating capacity of less than or equal to 12 +1 (driver).

Will ITC be available for companies using vehicles to transport cash to ATMs?

Maharashtra Appellate Authority of Advance Rulings has allowed input tax credit for companies using vehicles to transport cash to ATMs on the grounds that the money in this case should be considered as goods and not legal tender in the case of CMS Info Systems Ltd.

Facts of the Case:-

1.Appellant is having cash management network pan in India and is engaged in the following activities:-

i. Providing ATMs and installing the same across India

ii. Managing cash circulation through transporting cash from currency chest to bank branches

iii. Cash pickup and delivery from and to dedicated banks

2. Such transportation of cash is done through security vans

Appeal to Authority for Advance Ruling (AAR)

1.An advance ruling from AAR was sought on the following two questions of law :­

i. Whether supply of such motor vehicles as scrap after its usage can be treated as supply in the course of furtherance of business and whether such transaction would attract GST? If yes, please provide the rate of GST and / or Compensation Cess.

ii. If answer to question (i) is in affirmative, whether Input Tax Credit is available on purchase of motor vehicles i.e. cash carry vans which are purchased, used for cash management business and supplied post usage as scrap.

2. As far as question no (1) was concerned, the AAR answered the question in the affirmative i.e. motor vehicles sold after usage as scrap would be chargeable to Goods and Services Tax.

3. However, there was a difference of opinion between the members of the AAR in respect of question no (2).

4. This resulted in the AAR making a reference to the Appellate Authority for Advance Ruling (AAAR).

Reference to Appellate Authority for Advance Ruling (AAAR)

  1. With reference to question no (2), the AAAR held that the input tax credit would not be available on purchase of motor vehicles i.e. cash carry vans.
  2. This is particularly on the ground that money is excluded from the definition of goods as provided under the GST Act, 2017.
  3. Thus CMS Info Systems is not entitled to ITC in view of Section 17(5) of the GST Act.
  4. The company challenged the order before the Bombay High Court.

Appeal to High Court (HC)

  1. HC found that the fundamental submission of the petitioner before the AAAR was the fact that money would stand covered by the definition of ‘goods’ under Section 2(52) of the GST Act as long as the same is not used as legal tender.
  2. This was on the basis of the definition of money provided in Section 2(75) of the GST Act. The aforesaid principal submission though recorded, has not been dealt with at all in the impugned order.
  3. Reliance placed in the impugned order upon the press note issued subsequent to a GST Council recommending to allow of ITC in respect of the motor vehicles used for transportation of money, would not by itself lead to the conclusion that prior thereto, money was not included within the definition of goods.
  4. This has to be examined in terms of the definition of ‘goods’ and ‘money’ found in GST Act.
  5. The entire issue before the AAAR as raised by the petitioner was whether the vans / motor vehicles in which the petitioners were transporting cash, would be money for the purpose of Section 2(52) of the GST Act. This aspect has not been dealt with in the impugned order of the AAAR.
  6. It was noted that the decision making process has not been complied with by the AAAR. It is necessary for the AAAR to consider the submissions made by the parties before it and give its findings in the context of the submissions made. Ignoring a submission would render the order vulnerable to judicial review by this Court.
  7. Therefore, the HC set aside the impugned order of the AAAR and restored the question to the AAAR for fresh disposal in accordance with law.

Appeal Before AAAR (on HC remand)

In view of the observations of the High Court, the AAAR set out to reconsider the submissions made by the appellant afresh.

Submissions by Appellant

  1. The appellant had submitted that they were mainly engaged in the business of ATM cash replenishment services, cash delivery and pickup services, management consultancy services etc
  2. The appellant was discharging their GST liability on the entire value charged for supply of the said support services.
  3. They had to purchase the motor vehicles and design the same according to the RBI guidelines, which are then used to transport the cash/bullions as a part of the cash management services agreed to be provided to their clients as per the terms of the agreement.
  4. They further submitted that the money being transported by the cash carry vans under question was nothing but ‘goods’ for them as they could not use the money for any purpose whatsoever. They were simply acting as bailee for their clients.
  5. Money under Section 2(75) of the CGST Act, means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value.
  6. As per Section 2(52) of the CGST Act, “goods”means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
  7. These moneys are not used as legal tender at any stage of the services rendered by them and hence those services cannot be considered as money in accordance with its definition under Section 2(75).
  8. Reference is also provided to Rule 138(14) of CGST Rules, 2017 which provides the list of the goods, which does not require e-way bills for their movement or transportation by the motor vehicles from one place to another.
  9. In the aforesaid rules, currency has been specified as one of those goods which do not require an e-way bill for their transportation from one place to another.

Observations by AAAR on whether money is to be considered as goods

  1. When it has been established that the appellant cannot use the money, which belongs to the client at any stage, it rules out the possibility that the money transported can be used as legal tender.
  2. Thus, it can be adequately inferred that the subject money, transported in the cash carry vans, ceases to be anything except goods under the facts on this case.
  3. On perusal of Rule 138(14), it is clearly evident that only goods are mentioned therein. Among those goods, one of the items mentioned in the annexure bearing the heading ‘’Description of Goods’’ is ‘money’.
  4. This clearly indicates that the Legislature has considered ‘money’ as ‘goods’, when money is being transported from one place to another.
  5. From the above facts it was inferred that money under question is nothing but goods.
  6. Department’s contention that money be treated differently from other goods was held to be devoid of any merit and hence not tenable, being erroneous and absurd.

When it was established that money, transported by the Appellant in the cash-carry vans, can be considered as goods, ITC w.r.t cash-carry vans used for transportation of cash will be available to the appellant in accordance with the provisions of Section 17(5)(a)(ii) of the CGST Act, 2017.  

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