Inter state movement of demo vehicles between distinct persons attracts GST

Last updated: 04 July 2023

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Quick Summary

The Madhya Pradesh High Court has ruled that the movement of demonstration vehicles between distinct persons in different states is subject to Goods and Services Tax (GST). The court dismissed a petition from Kia Motors India Pvt. Ltd., upholding the view that such inter-state transportation, even without a sale, requires compliance with GST regulations, including the filing of an e-way bill.

Court :
Madhya Pradesh High Court

Brief :
The Hon'ble Madhya Pradesh High Court in M/s Kia Motors India Pvt. Ltd. v. The State of Madhya Pradesh & Ors. [Writ Petition No. 20600 of 2020 dated May 1, 2023] dismissed the writ and held transporting demo vehicle from one state to another between distinct person attracts GST.

Citation :
Writ Petition No. 20600 of 2020 dated May 1, 2023

The Hon'ble Madhya Pradesh High Court in M/s Kia Motors India Pvt. Ltd. v. The State of Madhya Pradesh & Ors. [Writ Petition No. 20600 of 2020 dated May 1, 2023] dismissed the writ and held transporting demo vehicle from one state to another between distinct person attracts GST.

Facts

M/s Kia Motors India Pvt. Ltd. ("the Petitioner") challenged an order passed by theAppellate Authority dated December 23, 2019 upholding the demand of tax and penalty pertaining to non-payment of GST on transporting demo vehicles from one state to another between distinct person.

The Petitioner contended that bringing demo vehicle into the State does not make transaction exigible to GST as there is no sale or purchase transaction taken place.

The Revenue Department contended that the Section 129 of the Central Goods and Services Tax Act, 2017 ("the CGST Act")r.w. Rule 138 of the Central Goods and Services Tax Rules, 2017 ("the CGST Rules") the movement of goods exceeding value INR 50,000/- even if they do not fall under the definition of supply, becomes exigible to GST.

Issue

Whether movement of demo vehicles from one state to another between distinct person attracts GST?

Held

The Madhya Pradesh High Court in Writ Petition No. 20600 of 2020 held as under:

Noted that, as per Rule 138(1)(ii) of the CGST Rules, causing of movement of goods exceeding the value INR 50,000/- even if the reason is not related to supply would requires taxpayer to fill Form-A GST, EWB-01 on the common portal along-with necessary information.
Further noted that, the Petitioner has not provided any information which is mandatory as per Rule 138(1) of the CGST Rules.
Held that, transportation of demo vehicles from one state to another between distinct persons is exigible to GST.
Dismissed the petition after finding no fault in order of Appellate Authority.

FAQ :

Yes, the Madhya Pradesh High Court has held that the inter-state movement of demo vehicles between distinct persons attracts GST.

The petitioner argued that bringing demo vehicles into a state did not constitute a sale or purchase transaction, and therefore should not be exigible to GST.

The Revenue Department contended that under Section 129 of the CGST Act and Rule 138 of the CGST Rules, the movement of goods exceeding INR 50,000, even if not a supply, becomes exigible to GST.

The court noted that Rule 138(1)(ii) of the CGST Rules requires the movement of goods exceeding INR 50,000, regardless of the reason, to have an e-way bill (Form GST EWB-01) filed.

No, the court noted that the petitioner had not provided the mandatory information as required by Rule 138(1) of the CGST Rules.