Input tax credit

[DK AGGARWAL]

Sir

Please confirm if ITC is allowed on Car repair expenses like change of tyres, change of battery etc when the car is registered in name of company and supplier and receiver are both registered in GST. Is it allowed on normal repair/maintenance also when Car is sent to gurage for change of Oil, filters etc

2---Is ITC allowed on Diwali gift articles like Toaster, Mixi, sweet boxes etc given to customers as sales promotion.

D K Aggarwal

[KASTURI SETHI]

Not allowed in both cases.

[PAWAN KUMAR]

In first case, since you are not using car in your outward taxable supplies hence all expenses related to the said car is ineligible.

In second case, ITC is not applicable on items given as free or sample.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

I also endorse the views of Shri Kasthuri.

[Himansu Sekhar]

1. Repair and maintenance charges of cars is allowed as ITC.

2. ITC on the goods used for gifts is not allowed as the supplies are without considerations.

[KASTURI SETHI]

Dear Sir, When motor vehicle is excluded from ITC as elaborated by Sh.Pawan Kumar Ji, how ITC on repair is admissible ? Pl. Throw more light on the issue for enrichment of my knowledge.

[Himansu Sekhar]

Sir, the cars are used for furtherance of business. The vehicles are restricted for the ITC. But the services like repairs and maintenance are not restricted under sec. 17(5). Also I have come across many tweets clarifying vsuch position.

[Himansu Sekhar]

I shall email the tweets to you. Under CCR rules, rule 2(l) specifically restricted such services.

Now it is furtherance of business. In my opinion there should no restriction for taking credit if sec. 17(5) does not hinder.

[KASTURI SETHI]

In this situation ITC is not allowed even it is in the course of or for furtherance of business. When any goods are in the exclusion clause, the phrase "In the course of or for furtherance of business" has no relevance or legal force. Here is a question of interpretation.

[Himansu Sekhar]

Even before 1.4.11, the input services for civil activities were allowed as credit whereas the input credit on such civil activities were not allowed. Also steel structural credit from 2009 was not eligible, but input services for erection of strtucturals were allowed up to 1.4.11 when rules spercificaslly denied the credit. In the instant situation input service credit is not deniable as section does not prohibits. It is my view.

With humility I also submit that difference of opinion exists in tax matters.

[JSW CEMENTLIMITED]

The Relevant portion of Section 17(5) is reproduced below as under:

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

(a) 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;

If we go through the starting line of it says that notwithstanding anything contained in Sub-section 1 of Section 16.......

input tax credit shall not be allowed in respect of the following......

Section 16(1) speaks about availability of input tax credit on goods or services or both used for furtherance of business. Section 17(5) starts with the word notwithstanding anything contained in subsection (1) of Section 16, which means that irrespective anything contained in Subsection 1 of Section 16, input tax credit shall not be allowed in respect of motor vehicles, these input tax credit may be towards purchase of motor vehicle or any service rendered in respect of such motor vehicles.

As such, Shri Kasturiji's opinion is very much correct to the extent that input tax credit on repair and maintenance of motor vehicle is not allowed.

[Himansu Sekhar]

Sir, it will lead to the denial of credit on renting not motor vehicles.

[JSW CEMENTLIMITED]

It will lead to denial of input tax credit in respect of motor vehicle be it suply of services or supply of goods

AI Summary

Input Tax Credit Not Allowed for Car Repairs and Diwali Gifts, Section 17(5) GST Act Discussed A forum discussion addressed whether Input Tax Credit (ITC) under GST is permissible for car repair expenses and Diwali gifts. The consensus among participants was that ITC is not allowed for both scenarios. For car repairs, it was argued that since motor vehicles are generally excluded from ITC unless used for specific taxable supplies, related expenses are ineligible. Similarly, ITC is not applicable for gifts given as sales promotions, as they are provided without consideration. Some participants debated the interpretation of Section 17(5) of the GST Act, but the prevailing view upheld the exclusion of ITC for these cases.