To understand this point lets read the law as below:-
As per Section 17(5) of CGST Act Input tax credit shall not be available in respect of the following, namely:—
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;
Now the point is whether Bike and Scooty cover in “motor vehicle” or not?
As per Section 2(76) of CGST ACT :- “motor vehicle” shall have the same meaning as assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988;
As per clause (28) of section 2 of the Motor Vehicles Act, 1988:- “motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five cubic centimeters
Here cubic centimeters mean CC engine capacity, Hence Bike and scooty having engine capacity more than specified limit will be covered in motor vehicle and ITC will be not eligible as per section 17(5) CGST ACT.
Further , GST Amendment Act 2018 applicable with effect from 01 Feb 2019 states that ITC under 17(5) will be blocked for Motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons.
Earlier ITC was prohibited for all motor vehicles and now seating capacity criteria has been inserted in new clause. Bikes are any way are having sitting capacity of less than 13 person .
Hence , it is cleared that ITC is not eligible on purchase of Bikes unless it is used for specific purposes as mentioned in Para 2 above .
CA UMANG GARG – email@example.com
(Article is republished with amendments by Taxguru Team & CA Anita Bhadra)