If Composition Dealer purchases Scrap/Used Vehicles from Centre, State, UT or Local authority, will dealer be liable to pay GST on RCM basis? Guj AAR explains


Gujarat Authority for Advance Ruling, GST: Addressing the matter with regard to purchase of scrap/used vehicles by composition dealer from unregistered dealer, Division Bench of Sanjay Saxena and Arun Richard (Members) held that, in the said circumstance, no Reverse Charge Mechanism liability will be there.

Applicant sought Advance Ruling on the following questions:

  • Can Composition Dealer Purchase Scrap/Used vehicles from Unregistered Dealers? RCM on these purchases applicable or not?
  • Any Reverse Charge Mechanism exemption limit amount from purchase of Scrap and used vehicles from unregistered dealers?


Bench stated that in view of Section 9(3) of the CGST Act, 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.

Vide Section 9(4) of the CGST Act, Government may specify a class of registered persons who shall, in respect of supply of specified categories 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.7/2019-Central Tax (Rate) dated 29-3-19 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).


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.

No RCM tax liability for purchase of subject goods from unregistered dealers.[Ahmedraza Abdulwahid Munshi (Nadim Scrap), In Re., GUJ/GAAR/R/18/2021, decided on 30-06-2021]

Advocate before the AAR:

For the applicant: Shabbir Motiwala, Consultant

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