Blocked input tax credit on motor vehicles does not extend to research-use vehicles later sold as scrap.

Input tax credit on motor vehicles is blocked under Section 17(5)(a) when the vehicles are acquired for automotive benchmarking research and later sold as scrap. The exception for further supply applies only where the motor vehicles themselves are acquired for onward supply as motor vehicles, such as dealer or demo-vehicle transactions, and does not extend to purchase for research use followed by dismantling and scrap sale. The treatment applicable to old and used motor vehicles, including valuation or notification-based concessions, does not alter this position. On that basis, the credit was held to be not admissible.

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Issues: Whether input tax credit on motor vehicles purchased for automotive benchmarking research and subsequently sold as scrap is available under the exception to blocked credit for further supply of such motor vehicles.

Analysis: The ruling applied the blocked-credit regime under Section 17(5)(a), which denies input tax credit on motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons, except when used for further supply of such motor vehicles, transportation of passengers, or imparting driving training. It was held that the exception for further supply applies where the vehicles are themselves supplied as motor vehicles, as in demo-vehicle or dealer-type transactions, and not where the vehicles are purchased for research use, dismantled, and later sold as scrap. The ruling also noted that the applicant's outward supply was not treated as sale of old and used motor vehicles and that the valuation and notification-based concessions for second-hand motor vehicles did not assist the applicant's case.

Conclusion: Input tax credit on the purchase of the motor vehicles was held to be not admissible to the applicant.

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