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2025 (1) TMI 616 - AAR - GSTAdmissibility of ITC of tax paid or deemed to have been paid - Whether input tax credit can be claimed on the purchase of motor vehicles in terms of exception provided under Section 17 (5) (a) of Central/Tamilnadu Goods and Services Act, 2017? - HELD THAT - Input Tax Credit is not available on motor vehicles with an approved seating capacity of less than or equal to 13 persons (including the driver). This encompasses most cars commonly used for business travel. There are exceptions to the general rule, allowing ITC to be claimed on specific categories of motor vehicles. However, specific restrictions apply to claiming ITC on motor vehicles. The eligibility of ITC on motor vehicles is provided with a particular focus on exceptions for motor vehicles not exceeding 13 persons (excluding driver) of seating capacity. To understand the intention of the Government and to decide the eligibility of input tax credit on 'motor vehicles for transportation of persons', the definition of Motor Vehicle and the provisions of Section 17 (5) of the CGST Act, 2017 is required to be studied. By providing an exception to the exclusion for availability of Input Tax Credit, the law is very clear and specific that except for the exceptions provided as sub-clause (A), (B) and (C), the input tax credit on the purchase of vehicles irrespective of any kind of outward supplies shall not be eligible. Hence, it is clear that for a motor vehicle specified in 17 (5) (a) of the Act, even if it is used for supplying goods or services is not eligible for availment of input tax credit, irrespective of whether or not it is used in providing taxable outward supply. The nature of outward supply rendered by the applicant would not fall under any of the exceptions provided under Section 17 (5) (a) of the Act. Accordingly, Input Tax Credit on the Motor Vehicles purchased for providing the taxable output supply of Automobile bench marking service' is not available to the applicant for availment. Conclusion - The input tax credit on the purchase of motor vehicles used for providing taxable outward supply of Automobile Bench Marking Service' and supplied as 'Scrap of Automobiles' is not available to the applicant as the applicant's activity would not fall within the exception to the exclusion provided under Section 17 (5) (a) of CGST/TNGST Act, 2017. 1. ISSUES PRESENTED and CONSIDERED The core legal question addressed in this judgment is whether the applicant, M/s A2Mac1 (India) Private Limited, can claim input tax credit (ITC) on the purchase of motor vehicles used in providing taxable output supply of Automobile Benchmarking Services under the exception provided in Section 17(5)(a) of the Central Goods and Services Tax (CGST) Act, 2017. 2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The judgment primarily revolves around the interpretation of Section 17(5)(a) of the CGST Act, which restricts ITC on motor vehicles used for the transportation of persons, except when used for further supply of such vehicles, transportation of passengers, or imparting training on driving such vehicles. The applicant cited several Advance Rulings and legal precedents, including cases from AAR Kerala, Maharashtra, and Madhya Pradesh, to support their claim for ITC on motor vehicles used for business purposes. Court's interpretation and reasoning: The court examined the nature of the applicant's business, which involves purchasing motor vehicles, conducting research, and providing benchmarking services. The vehicles are used exclusively for research and are later sold as scrap. The court interpreted Section 17(5)(a) to determine whether the applicant's activities fall under the exceptions allowing ITC. Key evidence and findings: The applicant provided evidence of their business activities, including the purchase and use of motor vehicles for research purposes, temporary registration of vehicles, and subsequent sale as scrap. The court scrutinized the nature of these transactions and the classification of the vehicles in question. Application of law to facts: The court applied the provisions of Section 17(5)(a) to the facts presented. It concluded that the applicant's activities do not meet the criteria for the exceptions outlined in the section. Specifically, the vehicles are not used for further supply as defined by the law, nor do they fall under the categories of transportation of passengers or imparting driving training. Treatment of competing arguments: The applicant argued that the vehicles are integral to their business model and should be eligible for ITC. They cited previous rulings where ITC was allowed for demo vehicles and vehicles used for leasing. However, the court distinguished these cases based on the specific nature of the applicant's business and the intended use of the vehicles. Conclusions: The court concluded that the applicant's use of motor vehicles does not qualify for ITC under the exceptions in Section 17(5)(a). The vehicles are used for research and sold as scrap, which does not constitute further supply or any other exception allowing ITC. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "The input tax credit on the purchase of motor vehicles used for providing taxable outward supply of Automobile Benchmarking Service and supplied as 'Scrap of Automobiles' is not available to the applicant as the applicant's activity would not fall within the exception to the exclusion provided under Section 17 (5) (a) of CGST/TNGST Act, 2017." Core principles established: The judgment reinforces the principle that ITC on motor vehicles is restricted unless the vehicles are used for specific purposes outlined in the law. The court emphasized the importance of adhering to the statutory definitions and exceptions when claiming ITC. Final determinations on each issue: The court determined that the applicant is not eligible for ITC on the motor vehicles used for research purposes and subsequently sold as scrap. The activities do not fall under the exceptions provided in Section 17(5)(a) of the CGST Act.
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