Shuba Lakshmanan | Nov 28, 2021 |
No RCM liability on used/scrap vehicle purchased from unregistered dealers by registered dealer- AAR
An advanced ruling is a mechanism whereby taxpayers can get answers or clarifications regarding supply of goods and services, directly from tax authorities and the primary objectives for such a mechanism are to reduce litigation, attract FDI due to transparent tax liability, provide certainty with respect to tax liability and disclose ruling in an inexpensive and transparent manner. The Authority for Advanced Ruling (AAR) constituted by the tax authorities interprets tax laws for the taxpayers and it was created to address any issues faced by taxpayers and assist them by providing a decision on the clarification sought. The AAR’s appellate authority is the AAAR (Appellate Authority or National Appellate Authority for Advanced Ruling). Section 95 to Section 106 in Chapter XVII of CGST Act covers the procedures and rules related to advance rulings. An application is made by the taxpayer on the clarification sought by them. The taxpayer is provided an opportunity of being heard by the AAR. If there is consensus on resolution on the clarification sought between the AAR and taxpayer, an ‘Advance Ruling’ is issued by the AAR and on the contrary, the matter is referred to the AAAR.
The question of law which is address through this AAR is as follows:
The applicant, M/S. Ahmedraza Abdulwahid Munshi (Nadim Scrap) contention is a scrap dealer involved in the purchase of used/scrap vehicles. An application was filed with the Gujarat AAR on the above stated questions and the applicant based their contention on several notifications issued by the government in this regard.
Three notifications and one amendment to the Act which are relevant to the instant case were cited by the applicant as follows.
Hence, based on the above notifications and amendments to the Act and sections, the applicant concluded that they are exempt from paying GST on RCM basis when supply of goods is from unregistered persons vide Notification no. 07/2019-Central Tax(Rate) dated 29.Mar.2019 as the scraps are covered under specific category of goods and services and there are no limites too for the exemption. Further if the applicant receives used/scrap vehicles from Central/State government, Union territory or local authority, the applicant (recipient herein) will pay GST on RCM basis vide notification no. 36/2017-CT(R ) dated 13.Oct.2017.
The AAR, on verification of the representation made by the applicant through the authorized representatives on 17.Jun.2021, acknowledged the clarification sought by applicant through its application. The representatives further presented their case as above.
The AAR took note of the 3 notifications and their corresponding amendments and also the amendment made to the Act and rules that the applicant being a composition dealer is liable to pay GST on RCM basis when supply of used/scrap vehicles are from Central/State government, Union territory or local authority. The AAR further concluded that there is no RCM liability on applicant, for goods received from unregistered dealers.
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