GST on Sale of Scrap Vehicles and Input Tax Credit
Selling old business vehicles as scrap is a taxable supply, but the right to claim tax credit remains legally unsettled.
- Ruling
- GST-ARA-08/2017/B-11 Mumbai, dt. 19.03.2018
- Dated
- 19 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Selling used business vehicles as scrap is a taxable supply under GST.
- The Authority for Advance Ruling reached a split decision on tax credit.
- One member argued cash vans transport goods, while the other disagreed.
In short
The company asked if selling old cash-carrying vans as scrap counts as a business supply and if they can claim Input Tax Credit (ITC) on the original purchase of those vans.
What has changed
How it worked before
Businesses were uncertain whether disposing of old assets as scrap triggered GST and whether the specific use of cash vans allowed them to bypass standard restrictions on claiming tax credit for vehicles.
What has changed
The authority confirmed that selling scrap assets is a taxable supply. However, because the members disagreed on whether cash counts as 'goods' for tax credit purposes, there is no final rule on whether you can claim credit for these specific vehicles.
Who this affects
Businesses that use specialized vehicles for cash management or similar services and eventually sell them as scrap.
An example
A logistics firm sells its old delivery vans as scrap. They ask if they must pay GST on this sale and if they should have claimed tax credit when they bought the vans. Based on this ruling, they must pay GST on the scrap sale, but the question of tax credit remains a grey area that requires a specific legal opinion.
What you should do
Treat the sale of scrap as a taxable supply. Because this ruling is only binding on the company that asked and resulted in a split decision, do not assume you can claim tax credit for your own vehicles without professional advice.
If you do nothing
If you assume this ruling allows you to claim tax credit, you risk a tax demand and penalties if your local officer disagrees. Since this ruling is not a universal law, your tax officer is not required to follow it.
The terms explained
- Input Tax Credit
- A system where you can reduce the tax you pay on your sales by the amount of tax you already paid on your business purchases.
- Taxable Supply
- Any sale or transfer of goods or services that is subject to GST.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
CMS Info Systems Limited
GST-ARA-08/2017/B-11 Mumbai, dt. 19.03.2018 · Maharashtra
Questions before the authority
- Whether supply of such 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? If yes, please provide the rate of GST and/or Compensation Cess.
- If the answer to Question 1 is in affirmative, whether Input tax Credit is available to CMS Info Systems Ltd. ('CMS' or 'the applicant') on purchase of motor vehicles i.e. cash carry vans which are purchased, used for cash management business and supplied post usage as scrap?
Facts
The applicant is engaged in cash management services, which involves transporting cash and bullion using specialized vehicles known as cash carry vans. These vehicles are purchased and used for business operations, and upon reaching the end of their useful life, they are disposed of as scrap. The applicant sought clarity on whether this disposal constitutes a taxable supply and whether they are eligible to claim Input Tax Credit (ITC) on the initial purchase of these vehicles.
Ruling
| Question | What the authority ruled |
|---|---|
| Disposal of scrap vehicles | Taxable supply Attracts GST as per applicable rates for scrap |
| ITC on purchase of cash vans | Split decision Member Borhade allowed ITC; Member Kumar denied ITC |
The Authority held that the disposal of motor vehicles as scrap constitutes a taxable supply under the GST Act. Regarding the availability of ITC on the purchase of these vehicles, the two members of the Authority differed in their opinion, leading to a split verdict.
Reasoning
The Authority determined that the disposal of business assets for consideration qualifies as a supply under Section 7 of the CGST Act. Regarding ITC, the decision turned on the interpretation of Section 17(5) of the CGST Act, which restricts credit on motor vehicles. One member reasoned that the vehicles are used for the transportation of goods (bullion/cash), thus falling under an exception, while the other member concluded that money is excluded from the definition of goods, thereby disqualifying the activity from the exception.
Provisions relied on
- Section 7 of the CGST Act
- Section 17(5) of the CGST Act
- Section 2(52) of the CGST Act
- Section 2(17) of the CGST Act
- Schedule I of the CGST Act
- Schedule II of the CGST Act
For the practitioner
This ruling confirms that the sale of old business assets as scrap is a taxable supply. However, it provides no definitive guidance on the availability of ITC for cash management companies purchasing cash vans, as the Authority reached a split decision. Practitioners should note that the eligibility for ITC in this specific context remains **legally unsettled** and subject to further appellate review.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/maharashtra_gst-ara-08_2017_dt_19.3.18_cmsisl.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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