ITC of Cess on Purchase of Vehicle for Factory Use

[PRAVIN TALEGAONKAR]

Dear All,

Recently we have purchase Two vehicle with capacity of 7 seater and Cubic Capacity of Engine more than 1452 CC and supplier levy Compensation Cess on same.

We are manufacturer.

My question is whether we can get ITC of Compensation cess. I know that we can't avail GST ITC since we are not in car transport business.

Regards

Pravin Talegaonkar

[Amit Agrawal]

As per Section 17(5)(a), 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;"

And very same restrictions applies while taking ITC of 'Compensation Cess' as per Section 11 of the Goods and Services Tax (Compensation to States) Act, 2017.

As informed by you, your are manufacturer and not entitled to take ITC against vehicles purchase by you (presumably on account of restrictions by above-said Section 17(5)(a)). In such a situation, you can not taken ITC even against 'Compensation Cess' charged to you while purchasing these vehicles.

Just an addition information:

Wherever ITC against 'Compensation Cess' is available & taken by any tax-payer, as per proviso to Section 11 of the Goods and Services Tax (Compensation to States) Act, 2017, 'the input tax credit in respect of cess on supply of goods and services leviable under section 8, shall be utilised only towards payment of said cess on supply of goods and services leviable under the said section.'

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Credit not eligible for cess.

Also let me ask, even if you avail where is it that you will be able to use it?

[KASTURI SETHI]

Dear Querist,

You have said, "I know-----------------business".

"I know that we can't avail GST ITC since we are not in car transport business."

What specific message you intend to convey ? What specific clarification is required ?

[KASTURI SETHI]

Dear Querist,

You have not responded to the replies of both experts. I think you must be satisfied with their replies.

Waiting for your response.

[Sadanand Bulbule]

Dear querist

In this case, ITC is blocked and therefore not entitled to be claimed, much less "Compensation Cess". Experts have rightly clarified. Go with their advice.

AI Summary

Manufacturer Cannot Claim ITC on Vehicles Due to GST Act Section 17(5)(a) Restrictions on Non-Transport Businesses A manufacturer inquired about claiming Input Tax Credit (ITC) on Compensation Cess for purchasing vehicles with a seating capacity of seven and an engine capacity over 1452 CC. The responses clarified that, under Section 17(5)(a) of the GST Act, ITC is not available for motor vehicles used for transporting persons unless for specific taxable supplies. This restriction also applies to Compensation Cess as per Section 11 of the GST (Compensation to States) Act, 2017. The manufacturer, not being in the car transport business, cannot claim ITC on these vehicle purchases.