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Block Credit - Motor Vehicle [section 17(5)(a),(aa),(ab) of CGST Act] - GST Ready Reckoner - GSTExtract Block Credit - Ineligible for ITC Section 17(5) of CGST Act , also referred to as blocked credits, is a very important provision for every regular taxpayer under GST. It defines a list of purchases on which GST is paid but businesses cannot claim these as the Input Tax Credit (ITC). In this article, we take you through the latest clause-by-clause analysis of Section 17(5) of CGST Act or ineligible ITC with examples. Section 17(5) of CGST Act , Notwithstanding anything contained in sub-section (1) of section 16 of CGST Act and subsection (1) of section 18 of CGST Act, input tax credit shall not be available in respect of the following, namely:- Clauses (a) Input tax credit on purchase of Motor Vehicle If motor vehicle purchase use for transportation of goods , input tax credit can availed without any restriction. If motor vehicles purchased for transportation for passenger, if approved seating capacity ( including driver ) is 13 or more, input tax credit can availed without any restriction. If motor vehicles purchased for transportation for passenger, if approved seating capacity ( including driver ) is 13 or less If motor vehicle use for making taxable supply Further supply of such motor vehicle like renting or lease services , automobile shop, showrooms, or manufacturing establishment Transportation of passenger Training and driving of such motor vehicle. Other than above mention used, no ITC available on motor vehicle. Clauses (aa) Vessels and aircraft If vessels and aircraft purchased use for transportation of goods , input tax credit can availed without any restriction. If vessels and aircraft purchased for transportation for passenger, input tax credit can availed with restriction. If vessels and aircraft use for making taxable supply Further Supply of ships, vessels or aircraft Passenger transportation service or plane service or cruise or boat rental service Imparting training and navigating vessels Imparting training or flying aircraft or planes Other than above mention used, no ITC available on vessels aircraft. Clauses (ab) Notified services of such motor vehicles and vessels ot aircraft. Following notified services used for such motor vehicle and vessels or aircraft- General insurance Servicing Repair maintenance Leasing ,Renting, Hiring [covered in clause (b)] If motor vehicle , vessel, aircraft is manufacturer's final product , ITC of notified services is available. If ITC of motor vehicle , vessel, aircraft available in Clause (a) and clause (aa) used in the business , then ITC of notified services is available. Examples Example 1:- Star car Pvt. Ltd. a car manufacturer purchased a tempo traveler (seating capacity of 15 persons for the transport of its employees within the factory premises. can Star car Pvt. Ltd. avail ITC on such purchases? In this case, Star car Pvt. Ltd. will be able to availed the ITC as tempo have sitting capacity more than 13 person . Example 2:- Kapil dairy uses tempo services for delivery of its milk product. in this case as supply of milk products is in course of business. Thus here ITC will be allowed as it is used for transportation of goods which is not covered in blocked credit under section 17(5) of CGST Act. Example 3:- Mr. Ramesh Tour Travel, purchase a car having capacity of 5 person for the Transportation of passenger, can be availed ITC or not. In this case, as per section 17(5)(a), if motor vehicle capacity is less than 13 person, but used for transportation of passenger than Mr. Ramesh Tour Travel can availed the ITC of car purchase. Example 4:- M/s Rupa Pvt. Ltd. purchased a truck used for goods transportation in factory and car used bus used for employees transportation seating capacity 10 person including driver. in the given case, First case motor vehicle is used for transportation of goods which is in course of business it is not specifically mentioned in section 17(5)(a) and M/s Rupa Pvt. Ltd. can availed ITC on purchase of truck used for transportation of goods, secondly case, as per section 17(5)(a) less than 13 capacity motor vehicle, ITC available on for the used for transportation of passenger, or Further supply of such motor vehicle or Training and driving of such motor vehicle, in this case car bus is less than 13 person capacity used for employees transportation, it is not fall under the condition mention as per mentioned in section 17(5)(a). so ITC cannot availed in this case. Example 5:- Indigo air purchase aircraft for transportation of passenger as well as used for imparting navigation training to pilots in this case, Indigo air can availed ITC as per section 17(5)(aa), because aircraft used for transportation of passenger and imparting navigation training and it is fall under condition mention in the provision. Example 6:- Jassi Roadlines provides GTA services, has renewed the truck general insurances which is used for transportation of goods. In this case, as per section 17(5)(ab) of CGST Act, notified specified services allowed for ITC, on which ITC claimed at the time of purchased according to section 17(5)() and (aa). therefore Jassi Roadline can availed ITC on the general insurances of truck, which used for the transportation of goods. Example 7:- Whether tax paid on repairs, maintenance and insurance of Motor Vehicles used for the purpose of business is eligible for ITC? [ refer FAQ Qus. 41 ] Ans. The ITC on repairs, maintenance and general insurance of those motor vehicles is blocked if the ITC is blocked under Section 17(5)(a) of the CGST Act 2017 . Motor Vehicles for transportation of Goods: ITC on repairing, maintenance and insurance of motor vehicles for transportation of goods is admissible with no restrictions. Motor Vehicles for transportation of persons: Thus, ITC on repairing, maintenance and insurance of motor vehicles for transportation of persons carrying more than 13 persons will be admissible. However, for motor vehicles for transportation of persons carrying up to 13 persons will be admissible only if it is used for transportation of passengers, further supply of such motor vehicles and imparting training on driving. [ Section 17(5) (ab) as substituted vide the CGST (Amendment) Act, 2018 ]
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