Section 17(5) of CGST Act 2017 Specifies the cases where Input Tax Credit (ITC ) is not available to the registered dealer

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I MOTOR VEHICLES,VESSELS AND AIRCRAFTS

ITC is not available with regard to purchase of  Motor Vehicles , Vessels and Aircrafts barring few exceptions as mentioned below

 

(a) Motor vehicles for transportation of persons like cars , motorcycles etc having approved seating capacity of less than 13 persons

 

Exceptions

When they are used for making the below mentioned taxable supplies namely

(A) further supply of such motor vehicles; or

Eg. ITC is available if the taxable person is dealing in sale and purchase of such motor vehicles

(B) transportation of passengers ( note here the difference between the usage of words persons and passengers)

Eg. ITC is available if the taxable person is into the business of plying vehicles for movement of    passengers

(C) imparting training on driving such motor vehicles;

Eg. ITC is available if the taxable person is running a Driving Traning Institute

 

(b) Vessels and aircraft

Exceptions

When they are used for making the below mentioned taxable supplies namely

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers and /or goods ; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

(c) services of general insurance , servicing , repair and maintenance of afore mentioned motor vehicles, vessels and aircraft

Exceptions

(A) ITC is available if the motor vehicles , vessel or aircraft are used for the purposes specified in the Exceptions

(B) ITC is available if the registered applicant is into the business of Manufacturing of such motor vehicles , vessels or aircrafts

(C) ITC is available if the registered applicant is into the business of Provision of supply of general insurance services

 

Answer 2) Yes, ITC wil be available. With effect from 1-2-2019, Input Tax Credit has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having approved seating capacity of more than thirteen persons (including the driver). Relevant Case Tata Motors Ltd (2020) 119 taxmann.com 106 (AAR Maharshtra)
Answer 3) Yes, ITC will be available as the commercial vehicle is being used for transportation of goods . ITC will also be available on the bus purchase as it has a seating capacity of more than 13 persons and doesn’t falls under the Motor vehicles specified in Section 17 (5) clause (a)

The Tax Planet’s Tip

Though ITC is not available on purchase of motor vehicle like cars , motorcycles and other similar vehicles but it doesn’t means that Gst paid on them is lost because the taxable person can still claim depreciation ( 20% in most cases) on the full purchase price (inclusive gst) which helps in reducing their Income Tax Liability.