Credit of GST on Car Rent

[Murari Agrawal]

We have taken a car on monthly hire charges for use of factory. Hire charges include Fuel Charges & driver's salary. The Service Provider is unregistered. Under which SAC No. reverse GST is payable and whether we can take credit of such reverse payment. Thanks,

[KASTURI SETHI]

SAC 9966 5% without ITC 12 % with ITC Earlier it was 18%. Reduced in the meeting GST Council held on 5 & 6.8.17

[Murari Agrawal]

Thanks Sir, pl clarify can we pay 12% on reverse charge basis and take ITC ? This question arises because no ITC is available on purchase of Car. Also, the condition of use in furtherance of business is to be considered.

[KASTURI SETHI]

In course or furtherance if business is first condition . There is a difference between purchase of a car and hiring a car. Both have different codes. HSN for purchase and SAC for service.

[Himansu Sekhar]

You cannot take the credit

[Rajagopalan Ranganathan]

Sir,

According to Section 17 (5) (a) of CGST Act, 2017 "input tax credit shall not be available in respect of 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;

Therefore if you hire the motor vehicle for use in the factory ITC in respect of GST paid on such vehicle is not available.

[KASTURI SETHI]

Yes. As detailed by Sh.Ranganathan Sir and also opined by Sh.Himansu Sekhar, you are to ascertain whether you fulfill the conditions laid down under Section 17(5) of CGST Act.2017. Thanks to both experts for making the picture clear.

[KASTURI SETHI]

Dear Querist,. If you are covered under any of exclusion clause A, B, C , (ii) detailed above, then you can take ITC. ITC is conditional.

AI Summary

Input tax credit on hired motor vehicles restricted; credit available only when vehicle use meets specified statutory exclusions.
Eligibility for input tax credit on GST paid for hired motor vehicles hinges on statutory exclusions: credit is generally disallowed for motor vehicles and conveyances except where they are used for further supply of such vehicles, transportation of passengers, imparting training on driving/flying/navigating, or transportation of goods. A hired car service is distinct from purchase; ITC is conditional and available only if the service use satisfies those exclusions.