ITC on second havd vehicle purchase, Goods and Services Tax - GST

[KALLESHAMURTHY MURTHY]

Dear Sirs,

A scrap dealer has purchased a second-hand vehicle, rebuilt and hired. It is used to supply food articles, vegetables, milk and other daily consumables. Is he eligible for ITC on the purchase of the second-hand vehicle or blocked u/s 17?

Posts / Replies

[Sadanand Bulbule]

Dear all

Repeated efforts can not separate salt from sea. So also certain truths are inherent and need to be accepted as they are. Too much dissection may destroy the whole thing. 

This is not in the context of any query. 

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir,  I am highly thankful to you for your sincere advice and it should become an integral part of our life style. Repeat value is zero here. Repetition does not yield any result. 

[VENU K]

From the question what I understand is 

1. A scrap dealer

2. Purchase of a second hand vehicle

3. Repairs and gives it on rent to third parties.

1.A scrap dealer buying a vehicle does not ipso fact make it scrap even if the vehicle is second hand. It is assumed that inward supply is not billed as scrap when we look at HSN code.

2. Assuming input tax was paid he is perfectly eligible to to claim credit if it is a goods transport vehicle and is used in his business by giving it on hire. From the query I understand so.

3.If he is letting it out on hire and charges tax on hire charges  , he can claim ITC even if it is a motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons.

If the HSN says that the inward supply is a vehicle , then the only way ITC can be denied is by showing that it is hit by provisions of 17(5)(a) in my opinion.

Enquiring into road worthiness, fitness etc is beyond the mandate of GST officer as long as the inward supply is a vehicle as per HSN

[Amit Agrawal]

IMHO, query is not drafted properly and result of its that TMI contributors left to assume / presume so many things (either knowingly or even unknowingly) while sharing their views. 

Having said that and while broadly agreeing with Shri VENU K Ji for his views at post No. 28 above, I wish to say the followings:

A. If what is purchased is a 'second hand motor vehicle' and NOT 'scrap', then, Section 17(5)(a) may come into play and availability of ITC will be dependent on other relevant factors (i.e. nature of vehicle - Goods Transport Carriage or Passenger Vehicle, If its Passenger Vehicle then what is capacity of such vehicle, usage of such vehicle etc.).

B. If what is purchased is NOT a 'second hand motor vehicle' but 'scrap', then, Section 17(5)(a) will not come into play at all and ITC can be availed by the tax-payer (i.e. scrap dealer) as long as such 'scrap' is used in course of or furtherance of his business. 

C. For views given in Para 'B' above, same are with the presumption that nature of goods ('scrap' instead of 'second hand motor vehicle') is NOT changed to circumvent blockage of ITC u/s 17(5)(a) at end of purchaser (or / and, for avoiding additional tax-liability from point of seller) and the tax-payer can prove the same based on 'evidences' showing "factual position of goods purchased was indeed 'scrap' and not 'second hand motor vehicle'" as on date of purchase. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Please read first line of my post above as follows: IMHO, query is not drafted properly and here, TMI contributors left to assume / presume so many things (either knowingly or even unknowingly) while sharing their views.

[k.lakshmipati rao]

Dear Mr. KALLESHAMURTHY MURTHY

Since the query is not drafted properly, TMI contributors left to assume / presume so many things (either knowingly or even unknowingly), therefore, request you to kindly check for the factual of transaction with your Scrap dealer, and resend the query so as to minimize our correspondence in the matter.

[KASTURI SETHI]

Now all the facts are available at serial no.24 above.  Sh.Kalleshamurthy Murthy Ji has  already worked hard to make the query crystal clear. He did not remain dormant. 

The query was not clear only  at the first instance.

[Sadanand Bulbule]

Dear all

"One query, many perceptions". Thought-provoking discussion.