ITC on motor vehicle is available on GST pay under certain circumstances. In this blog, we discuss everything about ITC on vehicle.
ITC on motor vehicle under GST
The ITC on motor vehicle under GST is available if such motor vehicles use for making the following taxable supplies. However, there are certain conditions:
• Input Tax Credit (ITC) is admissible for motor vehicles which use or intend to use for transportation of goods
• Moreover, ITC shall be allowable for passenger transport vehicles. These are approve seating capacity of more than 13 persons (including driver). In addition, there is no such restriction on ITC in this respect.
Also Read: Can you claim GST on travel?
Cases where ITC on Motor Vehicle is not available:
1. It is not available which use for transportation of persons having seating capacity of less than 13 including driver’s seat.
2. Furthermore, it is also not available on the services of general insurance, servicing, repair and maintenance. They are on motor vehicles use for transportation of persons having seating capacity of less than 13 including driver’s seat
Exceptions to ITC on Motor Vehicle Conditions
Exceptions to case where ITC on motor vehicle is available even if seating capacity is less than thirteen are:
• Further supply of such motor vehicles:
If the registered person deals in further supply of motor vehicles, he can claim ITC on vehicle if the seating capacity is less than 13.
For example, Ram Automobiles Limited is an authorized dealer of Audi Cars in Delhi. In addition, it purchases cars from Audi for further sale to retail and corporate customers. Furthermore, suppose, it purchases a car from Audi at Rs. 30,00,000 (GST 8,40,000) and sells it to Mr. Y for Rs. 35,00,000 (GST 9,80,000). Ram Automobiles Limited can claim ITC of Rs. 8,40,000 as it acquires cars for the business of further supply. And, shall therefore, pay net tax of Rs. 1,40,000 [9,80,000 – 8,40,000].
Also Read: How to claim GST ITC on Capital Goods?
• Transportation of passengers:
Registered person who is engaged in the business of transportation of passengers, can claim ITC on vehicle for GST pay on purchase of vehicles like car. Having said that, this claiming of ITC is not dependent on the seating capacity of the motor vehicle.
Take for example, Lakshman Tour and Travels is in the business of providing taxi services to tourists through cars. Accordingly, it purchases cars for providing such services. In this case also, Lakshman Tour and Travels is eligible to take ITC for GST paid on purchase of car.
Some other Exceptions to ITC on Motor Vehicle Conditions
Imparting training on driving on such vehicles:
Vehicle used for imparting driving training schools are also covered under this exception. In other words, if a driving training school purchases a motor vehicle with an intention to impart training on driving on such vehicles, then ITC on purchase of such motor vehicle shall be available to it.
Similar restrictions are placed on ITC of general insurance services, servicing, repairs as well as maintenance services in relation to passenger motor vehicles with a seating capacity of not more than 13 persons (including the driver). According to GST law, ITC of the general insurance services, servicing, repairs & maintenance etc. is admissible in the three above cases.
Also Read: GST E-Way Bill [Ultimate Guide]
Furthermore, ITC on motor vehicles of the above input services is also available to a taxable person who is engaged in the manufacture of such motor vehicles.
Conclusion
To sum it up, the following table sums up where ITC on motor vehicle is available and where it is not available:
| Motor vehicle for | Used for which purpose | Eligible or not? |
|---|---|---|
| Transportation of Goods | Any Purpose | Yes |
| Transportation of passenger having approved seating capacity of more than 13 persons (including driver) | Any Purpose | Yes |
| Transportation of passenger having approved seating capacity of 13 or less than persons ( including driver) | 1.Further supply of such motor vehicle 2.Transportation of passengers 3.Imparting training on Driving | Yes |
| Transportation of passenger having approved seating capacity of 13 or less than persons (including driver) | Any Purpose except above 3 | No |
FAQs
No ITC shall available as it is covered by the blocked credit under clause (a) of section 17(5) of CGST Act, 2017.
The exemption for ITC under section 17(5) is applicable only in respect of transportation of passengers. The same exemption can not be construe in respect of employees. Therefore, if an employer employs a vehicle having seating capacity more than 13 employees. In addition, he will be eligible for unrestrict ITC in respect of such vehicle. However, if he employs a vehicle having seating capacity of not more than 13 employees(including driver), ITC shall block in respect of such motor vehicle.
Yes, ITC shall be available for motor vehicle intend to use for transport of goods.
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