GST UPDATE ON ITC ADMISSIBILITY ON CASH CARRYING VANS 79/2020-21

The issue regarding admissibility of input tax credit on cash carrying vans has travelled upto High Court whereby the Hon’ble Bombay High Court remanded the matter back to the Appellate Authority for Advance Ruling for decision afresh after analysing the submissions made by the applicant, M/s CMS Info Systems Ltd. Since there was difference of opinion amongst the members of AAR on this issue, the matter was referred to AAAR, who originally denied the input tax credit on the fabrication of vans carrying cash to ATMs according to the guidelines of RBI on the grounds that the said vans cannot be considered as engaged in transportation of goods as the definition of goods given under section 2(52) of the CGST Act, 2017 excludes money and securities. It was held by the AAAR originally that the supply of such fabricated motor vehicles after usage as scrap is liable to GST and the input tax credit of the purchase of motor vehicles is not admissible. However, the issue was again considered by the AAAR on account of directions of Hon’ble Bombay High Court and the de-novo proceedings are the subject matter of discussion of the present update.

The main point involved was whether money/currency can be considered as “goods” and consequently, the input tax credit of vans carrying such currency can be construed as transportation of goods or not. It was held that the meaning of money as given under section 2(75) of the CGST Act, 2017 stated that money means any legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveler’s cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value. The AAAR held that as per agreement submitted by the appellant, it was clear that the cash given to them for transportation could not be used by them for any other purpose except for which it was given. Consequently, the cash carried by the cash carrying vans could not be considered as money so as to treat it as not covered by the definition of goods given in the CGST Act, 2017.

It is worth mentioning that reference was also made to provisions contained in Rule 138(14) of the CGST Rules, 2017 which specifies those goods which do not require generation of e-way bills for their transportation wherein money is also specified thereby indicating that money is to be treated as goods for its movement. Therefore, it was held that money transported by appellant in cash carrying vans can be considered as goods and so the appellant is eligible for availing input tax credit of purchase of motor vehicles which were used for transportation of goods being cash.

This decision indicates that the law cannot be read literally and at times, we need to apply the principle of harmonious construction for interpretation of the provisions of any Statue. In the present case, the definition of goods excluded money and so the input tax credit was denied on the grounds that the cash carrying vans are not transporting goods so as to be eligible for availment of credit. However, the Hon’ble High Court and the AAAR realised the importance of the phrase “In this Act, unless the context otherwise requires” appearing at the beginning of the definition section 2 of CGST Act, 2017 and resorted to purposeful interpretation of the definition of money given in section 2(75) of the CGST Act, 2017. The matter travelled upto to High Court and was finally decided by correctly interpreting the provisions of law by AAAR but with a huge litigation cost to the assessee. Litigation is definitely a costly affair in GST.

This is solely for educational purpose.

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GST UPDATE ON ITC ADMISSIBILITY ON CASH CARRYING VANS 79/2020-21

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