Availement of Input Tax Credit on Motor vehicles

[Ernst & Young]

Can some one help me on below query ?

Recently through an amendment, Input Tax Credit is allowed on Motor Vehicles if the approved seating capacity is more than 13 persons ( Including Drivers ) , Input Tax Credit is admissible with out any restriction. The same is effective from 01-02-2019.

In the case of following situations ,

If the Date of Rendering of Services falls before 01-02-2019 [ Effective Date of Amendment ], But the Invoices for the same has been received after 01-02-2019 [ Effective Date of Amendment ] -

Can the recepient of the service claim the Input Tax Credit based on the amendment even though the service were rendered before the effective date of amendment but the invoices were received after the date of amendment?

Thanks in Advance.

[KASTURI SETHI]

As per Section 13(2) of CGST Act, 2017 (as amended), the time of supply of service is the date of issue of the invoice.

Reply to second query is yes.

[KASTURI SETHI]

In continuation of my reply dated 22.2.19 above, restrictions imposed under Section 17(5)(a) remain the same. ITC on leasing, renting or hiring is still not allowed except the purposes mentioned in Section 17(5)(a) of CGST Act. Read carefully after the amendment. The words, "in respect of " mentioned in Section 17(5) above (a) are same even after amendment w.e.f. 1.2.19.

[Rajagopalan Ranganathan]

Sir,

Section 17 (5) prescribes that "notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :-

[(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles

Therefore motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), is used for further supply of such motor vehicles or transportation of passengers or for in parting training on driving such motor vehicles.

Here the words 'transportation of passengers' require further clarification regarding the input tax credit is available only for public transport companies or for a business entity who runs such vehicles for transporting workers from their home to factory and back. Moreover the business entity operates buses whose seating capacity is more than 13 persons. Normally motor vehicles with seating capacity not exceeding 13 persons is purely for tourist purpose only. May be the amendment benefit only tourism industry and not others.

According to Section 13 (2)CGST Act, 2017 "the time of supply of services shall be the earliest of the following dates, namely :-

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under [* * *] section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under [* * *] section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply :

Therefore if the invoice is issued after effective date of the amendment then you are eligible to avail ITC.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Rajagopalan.

[Ganeshan Kalyani]

The credit is eligible.

AI Summary

ITC on Motor Vehicles: Eligibility Depends on Invoice Date Post-Feb 1, 2019, Per Section 13(2) CGST Act. A query was raised regarding the eligibility of Input Tax Credit (ITC) on motor vehicles with an approved seating capacity of more than 13 persons, effective from February 1, 2019. The question focused on whether ITC could be claimed if services were rendered before this date but invoices were received afterward. Respondents clarified that according to Section 13(2) of the CGST Act, the time of supply of services is determined by the invoice date. ITC is available if the invoice is issued after the amendment date. Restrictions under Section 17(5)(a) on ITC for vehicles with less than 13 seats remain unchanged.