2026 (3) TMI 342 - AAR - GST

Input Tax Credit entitlement: prohibition in the used-vehicle notification is confined to the listed goods, ITC on other inputs allowed.

Notification No. 08/2018-Central Tax (Rate) restricts input tax credit (ITC) only in relation to the used motor vehicles specified in the notification; ... Eligibility to claim Input Tax Credit (ITC) on direct and indirect expenses (other than vehicle purchase) incurred in the business of selling used motor vehicles - Availing benefits under Notification No. 8/2018-Central Tax (Rate) dated 25th January 2018 as amended. Whether the applicant is eligible to avail Input Tax Credit (ITC) on inward supplies such as refurbishment expenses, marketing and advertising services, professional fees, housekeeping services, rent, office expenses, software subscriptions, manpower recruitment and staffing services, administrative overheads, and capital goods including laptops, equipment, and furniture. Eligibility for input tax credit on input services and capital goods under margin scheme for used motor vehicles - HELD THAT:- The Authority examined Notification No. 08/2018-Central Tax (Rate) and observed that the expression 'such goods' in paragraph 2 refers back to the specific goods listed in the Table and therefore limits the prohibition on availment of ITC to the old and used motor vehicles themselves. The notification consequently does not, by its language, extend the ITC bar to other inputs or input services procured in the course or furtherance of the used vehicle business. The Authority further considered Sections 16 and 17(5) of the CGST Act and found no statutory bar preventing a registered person, who sells under the margin scheme prescribed by the notification, from claiming ITC on admissible input services and capital goods (such as refurbishment and repair services, marketing and advertising services, professional fees, housekeeping, rent, office expenses, software subscriptions, manpower recruitment and staffing, administrative overheads, and capital goods) provided the conditions of Sections 16-21 and the relevant Rules are satisfied. The Authority noted that these expenses are incurred in the course or furtherance of business and are directly linked to the enhancement of sale value of the goods; therefore, the input tax paid on them qualifies as ITC, and paragraph 2 of the notification does not restrict such claim. [Paras 11, 12] The Applicant may claim input tax credit on the listed input services and capital goods while availing the margin scheme, subject to fulfilment of conditions in Sections 16-21 of the CGST Act and Rules 36-45 of the CGST Rules. Final Conclusion: The Authority ruled that the Notification No. 08/2018 margin scheme restriction on availment of ITC is confined to the notified used motor vehicles and does not prohibit the claimant from availing ITC on other admissible input services and capital goods, subject to statutory conditions. Issues: Whether a registered supplier availing benefit under Notification No. 08/2018-Central Tax (Rate) as amended can claim input tax credit on inward supplies other than the used motor vehicles covered by the notification, including refurbishment services, marketing and advertising services, professional fees, housekeeping and security services, rent, office expenses, software subscriptions, manpower recruitment and staffing services, administrative overheads and capital goods.Analysis: Notification No. 08/2018-Central Tax (Rate) applies specifically to the supply of the used motor vehicles described in the Table of the notification and para 2 of the notification bars the notification where the supplier has availed input tax credit on 'such goods'. The referential phrase 'such goods' must be read as confined to the goods listed in the notification. Sections 16 and 17(5) of the Central Goods and Services Tax Act, 2017 set out eligibility and specified exclusions for input tax credit; none of the exclusions in Section 17(5) extend to the ancillary input services and capital goods listed by the applicant. Rule 32(5) and the special rate scheme govern valuation and tax on margin for notified second hand goods but do not by their language prohibit claiming ITC on separate inward supplies that qualify under Sections 16 to 21 and Rules 36 to 45 of the CGST Rules, 2017. Applying principles of literal and referential interpretation, the prohibition in the notification is limited to ITC on the notified used motor vehicles themselves and does not operate to deny ITC on other inputs or input services incurred in the course or furtherance of the business, subject to statutory conditions for entitlement.Conclusion: The applicant is eligible to avail input tax credit on inward supplies other than the used motor vehicles covered by Notification No. 08/2018-Central Tax (Rate), including refurbishment and repair services, marketing and advertising services, professional and consultancy fees, housekeeping and security services, rent, office expenses, software subscriptions, manpower recruitment and staffing services, other administrative services, and capital goods, subject to fulfillment of conditions in Sections 16 to 21 of the Central Goods and Services Tax Act, 2017 and Rules 36 to 45 of the Central Goods and Services Tax Rules, 2017.