Input Tax Credit on Transport Vehicles

[Shyam Naik]

Dear Experts,

We are purchasing Trucks and using the same for providing taxable supply, ie. for mining operation. Accordingly, we take full ITC of the GST paid.

Later, we are also using the same vehicle for exempt service, ie. GTA.

Wherether, there is any requirement to reverse the ITC availed on capital goods, which were originally used for providing taxable service, but later on used for providing exempt service.

Kindly opine citing the statutory provisions.

Thank You.

Wiyh due regards,

Shyam

[Rajagopalan Ranganathan]

Sir,

According to Section 2 (19) of CGST Act, 2017 “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

According to Section 2 (47) of CGST Act, 2017 “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

According to Section 17 (5) (a) of CGST Act, 2017

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.

However GTA service is not exempt service. In respect of GTA Service you can pay gst @5% without ITC and @12% with ITC. Therefore the question of reversal of ITC does not arise in your case.

[Ganeshan Kalyani]

Refer Rule 43. Manner of determination of input tax credit in respect of capital goods and reversal thereof.

[Pavan Mahulkar]

Yes GTA is exempt service when opted to pay under 5% is covered under RCM & Under section 17(3) of CGST Act exempt supplies will include the supply where the recepient of the supply is liable to pay tax on RCM basis..

Thus definitely rule 43 will come in to play if you opt to discharge the liability of GTA Services under 5% tax bracket 

[KASTURI SETHI]

Sh. Pavan Mahulkar Ji,

 

[DR.MARIAPPAN GOVINDARAJAN]

I concur with the views of Shri Rajagopalan.

AI Summary

Reversal of ITC required for trucks shifting from taxable mining to exempt GTA services under Rule 43 and Section 17(3). A query was raised regarding the reversal of Input Tax Credit (ITC) on trucks initially used for taxable mining operations but later used for exempt services, specifically Goods Transport Agency (GTA) services. Responses indicated that GTA services are not exempt if GST is paid at 12% with ITC. However, if opting for a 5% GST rate under reverse charge mechanism (RCM), it may be considered exempt, necessitating ITC reversal under Rule 43 and Section 17(3) of the CGST Act, 2017. Opinions varied, with some agreeing on the need for ITC reversal under specific conditions.