This is an updation of my earlier article on the same matter wherein issue of availability of Input Tax Credit (ITC) in respect of services of repairs, insurance etc. for motor vehicles has been discussed.
Through CGST Amendment Act 2018, the law on this point has been amended by inserting clause (ab) to Sec. 17(5) to specifically deal with the matter . The meaning and purport of this new clause is that ITC in respect of services of general insurance, servicing, repair and maintenance related to a motor vehicle is now specifically in the blocked credit category, if such motor vehicle is –
Accordingly now, for example, in respect of a car, even though purchased for business purposes, ITC on its insurance, repairs etc. can not be claimed post applicability of 2018 amendment act.
It merits mentioning here that the amendment act has been made applicable w.e.f. 01/02/2019. The above mentioned newly inserted clause 17(5)(ab) has not been given retrospective effect as has been done with certain other sections of the principal act . The prospective applicability of the clause implies that, due to absence of any such restriction in the pre amendment law, ITC on repairs etc. of all types of motor vehicle, upto 31/01/2019, was NOT in the blocked credit category. It is only from 01/02/2019 onwards, the restriction on such ITC comes into play.
Cases where ITC on motor vehicle repairing/ insurance services is available even after amendment
A careful reading of amended law gives us following situations where ITC on repairing/ insurance services of motor vehicle is still available (subject to, of course, fulfillment of other basic conditions for availment of any ITC) :
1. Motor Vehicle for transportation of persons having approved seating capacity of more than 13 persons. ( e.g. A Bus)
2. Motor Vehicle for transportation of goods. ( e.g. A Truck)
3. Motor Vehicle used for making following taxable supplies, namely:—
(A) further supply of such motor vehicles ( e.g. In case of a Car Dealer)
(B) transportation of passengers (( e.g. In case of a Taxi Service Provider)
(C) imparting training on driving such motor vehicles ( e.g. In case of a Driving School)
4. Services received by a taxable person engaged—
(I) in the manufacture of such motor vehicles
(II) in the supply of general insurance services in respect of such motor vehicles insured by him;
Thus in all other cases apart from above 4, Input Tax Credit in respect of repairs/ insurance of motor vehicle is not available on and after 01/02/2019.
(Republished with amendments)