purchase of car - used to carry working staff - eligible for input

[giri gattupalli]

respected sir,

one of my clint purchased a car for purpose of transporting his staff from one service centre to another in all over state of andhrapradesh ...whether this car is eligible for input or not

please discuss.

thank you

[Rajagopalan Ranganathan]

Sir,

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

In view of the above-mentioned provision of CGST Act, 2017 your client is not eligible to avail ITC in respect of gst paid on a car for purpose of transporting his staff from one service centre to another all over the state of Andhra Pradesh.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Rajagopalan

[KASTURI SETHI]

I agree with both experts.

[Shilpi Jain]

Agree. There being no supply of taxable service of transportation of passenger or any other as mentioned in 17(5)

[Ganeshan Kalyani]

Sri Mariappan Sir , we were missing your guidance on the query. After long gap you came back. Thanks.

[SHARAD ANADA]

Pl inform whether providing transport services to the employee are obligatory for an employer to provide the same to its employees under any law for the time being in force. If yes ITC will be available as per second proviso to section 17(5)

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.]

[Shilpi Jain]

Also assuming it is not more than 13 seater. If more then credit will be eligible

[Shilpi Jain]

The present query is on ITC on motor vehicle and not hiring services. Hence even if obligatory for employer, credit will not be eligible

AI Summary

Input tax credit denial for staff-transport vehicles limited by seating capacity; exception only if law obliges employer to provide transport. ITC is ordinarily unavailable on motor vehicles with seating capacity of not more than thirteen persons, except when used for further supply of such vehicles, transportation of passengers, or imparting driver training; a proviso allows ITC where an employer is obliged by law to provide transport to employees, and vehicles above the seating-capacity threshold fall outside the exclusion.