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2019 (4) TMI 304 - AAR - GSTInput tax credit - GST paid on cars provided to their different customers on lease rent - Section 17(5) of Central Goods and Service Tax Act, 2017 - Held that - In respect of motor vehicles, except in certain circumstances, the Input Tax Credit is not available. These exceptional situations are enumerated in the Sub Section 5(a) after the amendment and sub section 5(a)(i) and (ii) before the amendment - In the present case, the Applicant is providing cars on Lease Rent to their customers for carrying passengers and hence not covered by the exception as provided in clause (B) and (C) of sub section 5(a) after the amendment and in clause (B) and (C) of sub section5(a)(i) before the amendment as well as in Sub section 5 (a) (ii) of Section 17 before the amendment. The sub section 5 (a) (i) reads as for making following taxable supplies namely and sub section 5(a)(A) after the amendment /5(a)(i) (A) before the amendment, reads as further supply of such vehicles or conveyances . The term 'Supply' is wide in its import and includes all forms of supply of goods and / or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to the made for a consideration by a person in the course or furtherance of business. Similarly a taxable supply means a supply of goods and / or services which is chargeable to goods and service Tax under the GST Act. The activities carried by the Applicant regarding supply of tax paid motor vehicles on monthly lease rent plus Goods Service Tax as applicable to their customer under a proper agreement properly satisfies the conditions laid down under Section 17(5) (a) (i) (A) before the amendment and under subsection 5(a)(A) after the amendment to make it eligible for availment of input tax credit on motor vehicle for the Tax paid by it while acquiring the said vehicles. ITC allowed.
Issues Involved:
1. Admissibility of Input Tax Credit (ITC) on cars provided to customers on lease rent under Section 17(5) of the Central Goods and Services Tax Act, 2017. Issue-wise Detailed Analysis: 1. Admissibility of Input Tax Credit (ITC) on Cars Provided on Lease Rent: Applicant's Business and Taxation Background: The applicant, registered under the GST Act, provides "Goods Transport Agency Service" and charges GST at 12% on outward supplies. They claim ITC on inward supplies such as vehicle maintenance, repair services, and insurance. Recently, they purchased cars and leased them to companies under a lease agreement, paying GST on these purchases. Questions Raised: The applicant seeks clarification on whether GST paid on cars provided on lease rent to customers is available as ITC under Section 17(5) of the CGST Act, 2017. Department's Viewpoint: The department opined that the applicant is entitled to avail ITC on vehicles leased to customers, provided the vehicles are registered for commercial use and comply with Section 17(5) of the CGST Act, 2017, and relevant notifications. Applicant's Interpretation: The applicant argued that under Section 16(1) of the CGST Act, every registered person is entitled to ITC on goods or services used in the course of business. Section 17(5) outlines conditions for ITC on motor vehicles, allowing ITC for vehicles used for taxable supplies such as further supply of vehicles, transportation of passengers, or goods. Discussion and Findings: The Authority for Advance Ruling (AAR) considered the submissions and found the issue covered under Section 97(2)(d) of the CGST Act, 2017, relating to the admissibility of ITC. The applicant's primary business is providing "Goods Transport Service," and they recently leased cars to companies, paying GST on these purchases for business purposes. Legal Provisions: Section 16 of the CGST Act allows ITC on goods or services used in business. Section 17(5) restricts ITC on motor vehicles except when used for specific taxable supplies, such as further supply of vehicles, transportation of passengers, or goods. Analysis of Terms: The terms "taxable supply" and "further supply" are crucial. "Supply" under Section 7(1)(a) of the CGST Act includes sale, transfer, lease, etc., for consideration in business. The AAR noted that the applicant's activities, including leasing cars, constitute "taxable supply." Eligibility for ITC: The AAR concluded that the applicant's leasing of cars meets the conditions under Section 17(5)(a)(i)(A) before and after the amendment, making them eligible for ITC. The cars must be registered for commercial use, and ITC is not available if the vehicles are used personally by the applicant. Ruling: 1. The applicant is entitled to avail ITC on cars leased to customers, subject to conditions in Notification No. 11/2017-Central Tax (Rate) and corresponding MPGST notifications. 2. Rule 42 provisions apply if necessary. 3. Upon lease termination, if the vehicle is not re-leased, the applicant must reverse the availed ITC as per law. 4. Vehicles must comply with the Motor Vehicle Act and be registered for commercial use, not personal use by the applicant.
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