Credit of GST paid in respect of Motor Vehicle

[Ashwarya Agarwal]

This is a general update for frequently asked queries in relation to credit of GST paid on purchase of Motor Vehicle and other incidental & traveling expense. There has been contradictory opinion on this issue by various experts, however I would like to share my view.

As per Sec 17(5) of the CGST Act, credit shall not be available for GST paid in respect of motor vehicle and other conveyance, EXCEPT when it is used for:

• Transportation of GOODS;
• Further supply of such vehicle;
• Transportation of Passenger;
• Imparting training on driving;

Further credit of GST paid on Rent-a-cab is also not available, except when it is used for further supply of same service or used under any statutory obligation.

Hence on analysis of above provision, I am of the opinion that the word 'in respect of" is used in relation to purchase of any motor vehicle. Hence if a passenger vehicle is purchased, except for purpose mentioned above, then credit of GST paid on such purchase is not allowed. Other than that, if there any incidental expense like insurance, repair, etc of such motor vehicle, than credit is allowed. 

If you purchase motor vehicle for transport of Goods, than credit is allowed on purchase of such motor vehicle. 

Further, any GST paid on traveling expense like Train, Flight, Bus, etc (Other than rent-a-cab) is also allowed.

Many taxpayers may have missed to take credit of GST paid on such expense as discussed above, incurred for FY 2017-18; do not worry as you can avail the same now, before filing of GSTR 3B return for the month of September 2018.

Note: If there is any invoice dated of FY 2017-18 for which you have failed to take credit, your can take the same even now  before filing of GSTR 3B return for the month of September 2018.

I hope you find the same helpful.

Discussions to this article

[KASTURI SETHI]

Dear Sh.Aggarwal Ji,

Nice article. This article was required to clear the air. Timely and very very informative and useful. One must not be a victim of phobia of the department, if intention as well as interpretation and understanding of law is crystal clear. Mostly suffer loss of ITC out of phobia. Your article makes the assessee able to muster courage to claim what is right.

[Praveen Nair]

Dictionary Synonyms:

in respect of (or with respect to)

as regards; with reference to, concerning, regarding, as regards, in/with regard to, with reference to, relating to, respecting, as for, as to, re, about, apropos, on the subject of, in the matter of, in connection with; vis-à-vis; in re

As per Sec 17(5) of the CGST Act, credit shall not be available for GST paid in respect of motor vehicle and other conveyance, EXCEPT when it is used for:

• Transportation of GOODS;
• Further supply of such vehicle;
• Transportation of Passenger;
• Imparting training on driving;

The above section doesn't mention anything about Purchase of Motor vehicle. It says in respect of motor vehicle and other conveyances. As per the synonyms it implies any expenses related to or in reference to Motor Vehicles.

In my view GST credit on Insurance, Repairs etc... relating to Motor Vehicles as we understand from Section 17(5) is inadmissible.

Regards, Pravin

[Pavan Mahulkar]

Agreed with Praveen..