EXAMPLE-62

Company A purchased a specialized trading terminal for Rs 4 lakh + GST @18% on 1^st August, 2017. The company expected the system to last 8 years and will generate a residual value of Rs. 20000.

However, due to rapid changes in technology, the company was forced to abandon the system only after 2 years for Rs. 1 lakh and invest in new infrastructure.

Whether the disposal of such terminal is taxable under GST?

Answer

As per Section 7 of CGST Act, supply of goods and/or services covers any activity such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for consideration and for business.  However, as per Schedule I, permanent transfer or disposal of business assets where input tax credit has been availed on such assets even without consideration is covered under GST.

Schedule II also specifies that where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

Thus, in accordance with above provisions transfer of specialized trading terminal on which ITC is claimed at the time of purchase is covered under the scope of supply. Value of supply is determined according to section 15, if supplier and buyer is not related and price is the sole consideration then  transaction value i.e. Rs. 1 lakh in this example is value for the purpose of GST(assumed it is excluding tax)