ITC credit eligibility on commercial vehicles

[VEKIT SHETTY]

I run a Multistate cooperative society in which I'm purchasing commercial vehicle with ITC of 8 lakhs where I'll be advertising my institution loans and interest rates

So will I be eligible for ITC on this vehicle purchase?

[Kiran Tahelani]

Section 17(5) restricts only motor vehicle for transportation of passengers (13 or less seats) not on other vehicles. in my view yes. but wait for others to reply.

[GUNASEKARAN K]

According to Section 17(5) (a) of CGST Act, input tax credit is not available on motor vehicles used for transportation of persons having approved seating capacity of less than thirteen persons, this includes the seat of the driver.

At the same time, if such motor vehicles are used for making the following taxable supplies, input tax credit is available:

1. Further supply of such motor vehicles – the registered person is in the business of selling such motor vehicles

2. Transportation of passengers – the registered person is in the business of transport services of passengers

3. Imparting training on driving such motor vehicles – the registered person is in the business of providing training on driving by using such motor vehicles.

Also Section 17(5) (ab) of CGST Act, denies input tax credit on the services of general insurance, servicing, repair and maintenance for the motor vehicles having seating capacity of less than thirteen. At the same time input tax credit is available on the services related to motor vehicle insurance, repair and maintenance of such vehicles if they are used for the purposes mentioned in the Points 1, 2 & 3 as above.

Apart from the points 1, 2 & 3 above, ITC is available on the services of general insurance, servicing, repair and maintenance as received by a taxable person engaged in the manufacture of such motor vehicles or who is involved in the supply of general insurance services in respect of such motor vehicles.

In your case, the vehicle is used for outdoor advertising purpose to promote your institution's services. The Promotional Products / Materials & Marketing items used to promoting your brand & marketing your products / services can be considered as “inputs” as defined in Section 2(59) of the CGST Act, 2017. However, the GST paid on the same cannot be availed as input tax credit in view of the provisions of Section 17(2) and Section 17(5)(h) of the CGST Act, 2017.

This is my ex facie view and the same should not be construed as professional advice or suggestion.

[Padmanathan KV]

By commercial vehicle, I am assuming it is not passenger vehicle blocked under section 17(5)(a).

I beg to differ with the view that ITC is blocked under section 17(5)(h) as non of the situation contemplated in that clause is attracted here.

But I agree that apportionment of credit will be required under Section 17(2) read with Rule 42/43.

Also pls check if the option under section 17(4) has been exercised, in which case only 50% of ITC can be availed.

[Shilpi Jain]

Agree that credit is eligible and not blocked u/s 17(5) (assuming not a passenger vehicle <=13 seater).

Though if this is a financial institution then either provisions of rule 43 can be applied and credit proportionate to the exempt income can be reversed every year. Else as per s 17(4) 50% of the credit can be availed.

[KALLESHAMURTHY MURTHY K.N.]

The Querist has not mentioned the type of vehicle purchased. Considering the nature of the business, it can be assumed that it is a 4-wheeler. He is eligible for ITC if it is purchased in the name of the Society and is capitalised in the books of accounts used in the course of furtherance of business. If exercised option u/s 17(4), eligible to avail 50% of the ITC amount. The use of the car for personal work attracts Sec. 17(2). Hence needs to maintain a log book. Further, eligibility for ITC is subject to the provisions of Rule 42 which provide reversal of ITC for personal use and as per Rule 43 (1)(c), the useful life of the vehicle is 5 years. The procedure laid down therein is to be followed.

 

AI Summary

Input tax credit for commercial vehicles may be allowed for advertising use, subject to apportionment and reversal rules. Input tax credit for a commercial vehicle used for advertising is available only if the vehicle is not within the blocked passenger-transport category, is capitalised and used for business, and the registered person complies with apportionment and reversal requirements for mixed or exempt use; related insurance and servicing credits are similarly conditioned and elective limitations may cap available credit.