Input tax credit (ITC) is the keystone of GST regime. Section 16 (1) of the CGST Act prescribes that “every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.”
Section 17(5) gives us the cases of blocked credit -any goods or services which are getting covered under the provisions of section 17( 5) shall not be entitled for ITC. However if something is not under the clutches of section 17( 5 ) and is being used or intended to be used in the course or furtherance of the business, ITC shall be available for this.
Clause (a) to section 17 (5 ) , declares motor vehicles and other conveyances as blocked credit, subject to certain exceptions. Accordingly no ITC is available in respect of motor vehicles. A very important question in this regard is whether this restriction on ITC for motor vehicles also applies to repairs, insurance etc. for motor vehicles?
In the opinion of author, restriction on ITC benefit in respect of motor vehicle DOES NOT get extended to repairs, insurance etc. for motor vehicles and as such there is no bar in availability of ITC on these services. Following analysis is relevant in this regard :
1. The opening line of section 17 (5 ) mentions that “input credit shall not be available in respect of the following….”. The wordings “in respect of” need to be contrasted with ” in relation to”. Whereas “in relation to” is larger in scope, “in respect of” is a restricted term and does not indicate that one is required to go beyond what is mentioned specifically in the section. An example for the case in point is definition of GTA services given in notification 12/2017 where Clause 2 (ze) is prescribing “goods transport agency means any person who provides service in relation to transport of goods by road….”. This clause covers entire gamut of services related with transportation of goods in its ambit since the wordings are “in relation to”. The same is not the case with Section 17(5).
2. In earlier Cenvat Credit Rules, wherealso Cenvat credit for motor vehicles was disallowed, service of “general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle” have been specifically excluded from the ambit of input services eligible for Cenvat credit. In the GST regime, where motor vehicles have been specifically included in the list of blocked credit, repairs/insurance services related with motor vehicle are conspicuous by their absence.
3. In section 17(5) itself, clause (b) – while blocking the credit in respect of food and beverages etc. – is referring to supply of “goods and services or both”. However any such reference to “goods or services or both” is missing in clause(a). In absence of any specific reference to “services” related with motor vehicle in clause (a), denying ITC of such services shall amount to adding words in a statue, which is clearly against the rules of interpretation. “(Parliament) is presumed to act intentionally and purposely when it includes language in one section but omits it in another.” Estate of Bell v. Commissioner, 928 F.2d 901, 904.
Thus it can be observed that services in the nature of repairs, insurance etc. for motor vehicles are not hit by the blocked credit provisions of GST law and accordingly ITC for the same is available if these services are used in the course or furtherance of business.