Multipal Business in Single GST input use, Goods and Services Tax - GST

[KS Bhat]

Sir/Madam

Mr A having Single GST number (regular)

Runs two type of Business

1. Own vehicale (Car ) renting Service

He is not collecting GST on renting and hiring service instead it will be dealcred as RCM nature and service receiver will pay the GST

2. Condiments Shop

Input of car (Yello Board) purchase is also used in total tax liability of business

Is this correct ?

Can he take input of car purchase while discharging Shop tax liability ?

 

Posts / Replies

[RAHUL MODI]

Relevant Extract of Section 17(5)(a) of the CGST Act, 2017

As per Section 17(5)(a) of the CGST Act, 2017, input tax credit on motor vehicles for transportation of persons having an approved seating capacity of not more than 13 persons (including the driver) is blocked, except when used for:

1. Further supply (sale) of such vehicles

2. Transportation of passengers

3. Training in driving such vehicles

1. Car Rental Service (Own Vehicles) – Taxable under RCM

• If the vehicle is used exclusively for providing passenger transportation services, ITC may be available.
• However, since the taxpayer is supplying car rental services under RCM, there is no outward GST liability, which may restrict ITC availability as per Rule 42 of CGST Rules.

2.  Condiments Shop

• Since a condiments shop primarily deals with goods, the key factor would be whether the vehicle is used exclusively for transporting goods.
• If the car is not registered as a goods transport vehicle, ITC is blocked under Section 17(5)(a).

[Shilpi Jain]

Credit of car not eligible since it is used for making supplies that are liable in hands of recipient under RCM

So then no question of using such amount of GST for discharging any liability.

[Yash Shah]

According to section 17(2) of the CGST Act 2017, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Further, as per section 17(3), exempt supply u/s 17(2) shall inter alia include supplies on which the recipient is liable to pay tax under RCM.

Additionally, as per Rule 42(1)(c)&(e) of the CGST Rules 2017, the amount of input tax paid on goods or services or both that are intended to be used exclusively for effecting exempt supplies shall not be credited to electronic credit ledger as ITC.

In the given case, since the outward supply of car is not taxable, i.e., recipient is liable to pay tax under RCM, therefore ITC of car purchased exclusively for renting and hiring service cannot be claimed.

However, if Mr A begins to charge tax of 12%, then he will not cover under entry 15 of N/No. 13/2017 - CTR and, therefore, shall become eligible to claim ITC, which can be utilised for discharging outward tax liability of either own vehicle car renting service, or condiments shop, or both.