Various notifications, Circulars, and Articles issued by various entities regarding the Input Tax Credit on Motor vehicles/ truck does not provide us the crisp information whether the Input Tax Credit is eligible or not.
Finally in the CGST Amendment Act, 2018 which is applicable from 1st February 2019 has addressed this issue and considering the lieu benefits of the taxpayers has almost resolved all the related issues in this concern.
In this article, I am expressing my views on whether the ITC of Motor Vehicles, Bikes, Trucks, and Scooter can be availed or not?? If yes then what are the conditions to claim that?? If no then why you cannot avail the ITC benefit???
When input tax credit for purchase and maintenance of the motor vehicle will be available in GST. Section 17(5) of CGST Act is amended from 1.2.2019. Before that period old provisions will be applicable but after that, you can take the ITC for a wider range. Now provisions for ITC of a motor vehicle is amended. ITC of motor vehicles used for the carriage of goods is freely available.
The language in the new Amended Act is like:-
” motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:—
(A) Further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
(ii) for the transportation of goods
(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available—
(i) Where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
(ii) where received by a taxable person engaged—
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) Membership of a club, health and fitness center; and
(iii) travel benefit extended to employees on vacation such as leave or home travel concession:
“Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.”
From this, we can state that the government has considered the transportation and the GTA industry also so that they can also take the ITC benefits on Purchase on Trucks and Heavy vehicles which are used by them in the course of furtherance of Business. The Basic definition for availing of input tax credit that the goods or services are must be used or intended to be used in the furtherance of due course of business. The taxpayer is eligible to claim the benefit of the Input Tax credit.
1. The Vehicles having the sitting capacity of more than 13 passengers the taxpayer is eligible to claim ITC of that Vehicles.
2. The Credit of such Vehicles which have capacity less than 13 like SUV’s car, even if they are used in the course of Furtherance of business the taxpayer is eligible to claim the Input tax credit on the same. Even the taxpayer is eligible to claim the ITC of a DEMO Car also.
Here the term furtherance of Course of Business includes:-
4. Companies providing services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft can also take the ITC Benefit.
5. When the Expenses occurred on the Travelling of the KMP, or the person by the company for which it is obligatory in nature than the company shall be eligible to claim the Input Tax credit benefit of such also.
If Motor vehicles are used for the purpose of transportation that the Taxpayer without any further clarification must take the benefit of ITC
If Motor vehicles having the capacity of more than 13 persons.
If Motor vehicles are used for the specified purpose stated in clause (a) & (b)
“If ITC is available in prior stated cases then the ITC on repairs maintenance, interest, and the Insurance is also available to the taxpayers”