Section
17(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1)
of section
18,
input tax credit shall
not
be available in
respect
of the following, namely:—
(a) motor vehicles and other conveyances except when they are used ––
(i) for making the following taxable supplies, namely: —
(A)
further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C)
imparting training on
driving, flying, navigating
such vehicles or
conveyances;
(ii) for transportation of goods;
In
clause (a) section 17(5) of the
Act , restriction has been imposed on input Tax credit relating to motor vehicle
,it means that tax credit of ‘input’ and ‘input service’ both will be
restricted.
Except
if such motor vehicle is being used for
(i)
Further supply
of such vehicle or conveyance
e.g. dealer of car (say Maruti dealer) would be eligible
to take credit of GST charged by the Maruti company
(ii) Input tax
credit will be allowed if motor vehicle is being used for transportation of passengers,
Now question arise that whether ITC would be eligible
on Motor vehicle which is being used by the company for transportation of
employee , my understanding is no ITC would be allowed because it cannot
be said a business of transportation of passenger. To avail ITC under this
clause output supply should also be classified as transportation of passenger.
Further discussion can be extended that use of motor vehicle for transportation
of employees is a “use in the
Business” thus it should be allowed, in one of it’s tweeter reply,
Department said that ITC on repair & maintenance etc of motor vehicle shall
not be allowed however while issuing FAQ
Department said that “ITC is allowed if GST paid on
insurance and repairs on vehicles which is vehicles is used for Business purpose only.
But keep in mind that such FAQ are just clarification and interpretation
sometimes may be different.
(ii)
ITC would
be allowed if Motor vehicle or conveyance is used for imparting training on
driving, flying, navigating;
e.g. A driving training school/institute
will be eligible for ITC on GST paid on its inward supply.
(B) ITC on Motor vehicle use for transportation of Goods:- Allowed
To avail ITC on use of such motor vehicle , motor vehicle should be
registered with transport authority as commercial vehicle and not for use in “private
use”
ITC would not be allowed if vehicle is registered for Private use even it
is completely used for business and for transportation of goods.
Whether
the input tax credit will be available on a passenger vehicle which is used for
transportation of goods only?
Ans. 5As per the CGST Amendment Act 2018, input tax credit
on motor vehicles for transportation of persons having approved seating capacity
of not more than 13 persons is blocked subject to certain exceptional
situations. Transportation of goods is not covered within this provision. So,
any motor vehicles for transportation of persons will be considered as a
blocked credit even though the same is actually used for transportation of
goods. (Resource –FAQ by ICAI )
Meaning of Motor vehicle shall be taken as
defined in in clause
(28) of
section 2 of the Motor Vehicles Act, 1988;