[Ref: Advance Ruling No. GUJ/GAAR/R/18/2021 dated 30.06.2021]
An application under Section 97(2) of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) was filed on 18.02.2021 by one M/s. Ahmedraza Abdulwahid Munshi (Nadim Scrap) Upleta Road, Behind Radhika Marble Dhoraji, Rajkot-360410, before the Gujarat Authority for Advance Rulings (GAAR). The applicant has sought an advance ruling in respect of the following question
1. Can Composition Dealer purchase Scrap/Used vehicles from Unregistered Dealers? RCM on these purchases applicable or not?
2. Any RCM exemption limit amount for purchase of Scrap and Used vehicles from unregistered dealers?
GAAR, in the aforesaid application by registered the matter as ADVANCE RULING NO. GUJ/GAAR/R/18/2021 (In Application No. Advance Ruling/SGST&CGST/2021/AR/05), has given the following answers, vide its order dated 30.06.2021:
1. 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.
2. There is no RCM tax liability for purchase of subject goods from unregistered dealers.
Basis of decision:
1. Section 9(3) of CGST Act, 2017:As per section 9(3) of CGST Act, 2017 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, 2017,the Central Government has issued a Notification No. 4/2017-Central Tax (Rate) dated 28-6-2017. However, later on the Central Government had made an amendment in said notification (4/2017), by Notification No. 36/2017-Central Tax (Rate) dated 13.10.2017 and after S. No. 5, in the said notification (4/2017), the following serial number and the entries were inserted.
|Sl. No.||Tariff item, sub-heading, heading or Chapter||Description of Goods||Supplier of goods||Recipient of supply|
|6.||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|
2. Section 9(4) of CGST Act, 2017: As per Section 9(4) of the CGST Act, 2017 (as amended and substituted vide CGST Amendment Act, 2018 dated 29-8-2018), the 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 28-6-2017 exempts intra-State 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 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 13-10-2017 vide which the proviso to the Notification (mentioned in para above) has been omitted.
Further, Notification No. 7/2019-Central Tax (Rate) dated 29-3-2019 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).
Based on the aforesaid notifications issued vide section 9(3) and the section 9(4) of CGST Act, 2017, the observations are as under-
(1) 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 13-10-2017. 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 29-3-2019.
(2) 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.
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