AAAR allows input tax credit on purchase/fabrication of cash-carry vans

Cash does not attract GST, but a cash van does. After a long legal battle, an Appellate Authority for AAR (AAAR) has ruled that Input Tax Credit in respect of ‘cash carry vans’ —used to transport cash — is to be made available.

The appellant, CMS Info System, is into cash management. Its activities involve providing ATMs and installing the same at various locations, managing cash circulation by transporting cash from currency chest to bank branches and cash pick-up and delivery from and to dedicated branches.

The case has had an interesting run down. First, the Authority for Advance Ruling (AAR) could not decide and referred it to AAAR which said that the company will not be eligible for ITC. Then the matter reached the Bombay High Court which set aside the order and asked AAAR to decide on the issue. Now, the same AAAR has considered and said exact opposite of what it said earlier.

Transportation of cash is done through security vans popularly known as ‘cash carry vans.’ The company purchases raw motor vehicles and requisite fabrication and gets them converted into a cash carry van. GST is paid on purchase of motor vehicle and fabrication. However, credit of GST is not available. When these vans cannot be used further, the company sells these motor vehicles as scrap. In certain cases, instead of purchasing motor vehicles, the company prefers to hire them.

CMS Info System wanted advance rulings on two issues: 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, then what would be rate of GST and/or compensation cess? The second question was, if the answer to the first question is in the affirmative then whether ITC is available to the company on purchase of motor vehicles.

The Tax Department’s key contention was that the company uses Special Purpose Vehicles (SPVs) to transport the money under RBI guidelines and therein ‘money’ is treated different from ‘other goods’ is “devoid of any merit and is not sustainable…… erroneous and absurd, and do not merit to be considered."

After HC’s order to hear and decide on the matter, the AAAR concurred with the company’s submission that what is being transported is not the money but ‘goods’, as they cannot use it for any purpose and hence, the same cannot be used as legal tender at any stage of the performance of the services rendered by them. Therefore, it inferred that the subject money transported in cash carry vans by them, ceases to be anything except goods under the facts.

Referring to Rule 138 (14) of the CGST Rules which specifies goods which do not require E-way Bill among which one of the items is ‘money’, it felt that said rule clearly indicates that the legislature has considered ‘money’ as goods when money is being transported from one place to another.

According to Harpreet Singh, Partner at KPMG, it is plausible ruling which has expounded the intent of the transaction while determining credit eligibility. “The ruling has once again established the doctrine of substance over form, by appreciating that ‘money’ in the underlying transaction was goods and not merely a legal tender,” he said.

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