In a recent decision taken by Maharashtra authority of advance ruling, it was announced that the business vehicles sold in scrap would attract GST no matter the age of the vehicle.
The decision is based on the assumption that the sale of the vehicle is considered an expansion of the business and will be taken as supply making it eligible for GST.
The decision may also hamper the already discussed vehicle scrap policy in which it is stated the all the old vehicles will be scrapped according to the rules and new vehicles will be offered at a discounted rates.
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Currently, there is 12 to 18 percent GST applicable on the old vehicles which are meant for further use but there was confusion in relation to the vehicles meant for scrappage.
According to the litigation which was filed for the decision over the old vehicles which was meant to be on sale, but it was found that the money recovered after the sales will be used again in the business and thus it would be considered as the supply under business.
The authority has announced the decision at the time when the Voluntary Vehicle Fleet Modernisation Programme (V-VMP) policy is under talks where the vehicles older than 15 years are proposed to be sold under scrappage and the new vehicles will be provided with tax rebates.
The transporters also stated that the vehicle scrapping might get slower than before due to this new tax implication. Also, it is feared that many of the scrap dealers are not registered under GST so there will be the implementation of reverse charge mechanism on the sale of such vehicles and would further increase the burden of the tax.
