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

Input tax credit on capital goods: no reversal if GTA is taxable with ITC; reversal if GTA taxed without ITC. Input tax credit on trucks treated as capital goods is allowable when used for taxable supplies. If those vehicles are later used to provide goods transport agency services, no reversal of ITC is required where the GTA supply is treated as taxable with ITC available; however, if GTA is taxed under an option that disallows ITC, the statutory mechanism for reversal of ITC on capital goods will apply.