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TMI Blog2025 (1) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ition 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 Automobi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d office at Kancheepuram in the State of Tamilnadu. The company has registered under the Goods and Service Tax Act with GSTIN 33AAOCA1565H1ZP. The Applicant is engaged in providing 'Collaborative Automobile Benchmarking services' by data management online platform to the customers as a subscription package through an online platform where the detailed analysis of software concept of structure, process and global benchmarking data is made available. From the database, the subscribers of the Applicant will get 360 degrees vehicle insights such as technology insights, cost insights, performance insights, market insights, sustainability insights, software insights, supply chain insights etc. The subscription to the company's knowledge database enables their customers to Benchmark and learn from most successful competitors, the best-in-class vehicle and their future innovations; Assess and address the fundamental challenges of cost, performance, supply chain and sustainability impact; Access to advanced comparison features and reporting tools that allow them to share these with users across different departments, locations and geographies, and help in optimizing the designs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid question. 4. SUBMISSIONS ON THE MERITS BY THE APPLICANT Under GST regime, input tax credit is a foundational mechanism provided under the Central Goods and Services Tax Act, 2017 and similar State enactments like Tamil Nadu Goods Service Tax, 2017, for the avoidance of cascading effect of tax. Referring to 'input tax', Applicant stated that any supply of goods/services used/intended to be used as an input during the course of or in furtherance of business, the input tax is the credit or can be reduced by the taxable person towards their outward liability. Input tax credit is essentially the set-off of the amount of GST paid on purchases from the amount of GST to be paid on the sales. At the time of paying tax on output supplies, the output tax liability may be reduced by the input tax credit which is the amount of tax already paid. Thus, the concept is to provide an uninterrupted inflow of credit at all stages of the business chain. The applicant quotes Section 16 which deals with the eligibility and conditions for taking input tax credit. Sub-section (1) entitles a registered person to take ITC on supply of inputs as well as capital goods with conditions and restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod and then sold after paying the applicable taxes on sale value at that time. Such sale amounted to making additional supplies, and when no time limit is prescribed in the GST Act, such sale would be eligible for input tax credit. In the case of M/s. Narsingh Transport, AAR, Madhya Pradesh has held that the applicant is entitled to avail ITC on cars (passenger vehicles) which are further supplied to customers on lease rent. The applicant submitted that the Hon'ble Supreme Court in the case of M/s. Bajaj Temp Limited, Mumbai Vs. CIT (1992) observed that while interpreting the statute, provision granting incentives for promoting economic growth and development should be liberally construed. Restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision. From the above, it is clear that mechanism of ITC under the GST regime is a noble approach to restrict the cascading effect of taxes and enable the registered taxpayer for effective set-off of the ITC paid by them against the outward tax liability. The primary criteria for such set-off of ITC against the output tax liability is that the input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 'bench marking service'. Further, the applicant is falling under State jurisdiction and hence the question of pending and decided proceedings on the subject issue in respect of the applicant does not arise. 7. PERSONAL HEARING Personal hearing was held on 25-09-2024. Shri. Prabhat BK, Chartered Accountant, Partner in M/s. Roy Vargese Associates and Authorised Representative (AR) attended the hearing. AR reiterated the submissions made by them in the facts of the case and submitted the merits of the issue. During the personal hearing, AR explained the business operations. On the merits, AR stated the exception to the exclusion provided under Section 17 (5) (a) of the Act. Hence claimed that they are eligible for the availment of ITC on the cars purchased by them for providing the taxable output service. Alternatively, AR claimed that the motor vehicle purchased and used by them is not used for transportation of persons and hence would not fall within the scope of Section 17 (5) of the Act. Hence they are to be considered as 'Plant and Machinery' on which they are eligible to claim ITC on its purchase. 8. DISCUSSION AND FINDINGS 8.1. The applicant is rendering A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9.3. The relevant extract of Section 17 (5) of the Act, to the present query sought by the applicant is reproduced below. Section 17. Apportionment of credit and blocked credits.- (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, .. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' having approved seating capacity of not more than thirteen persons (including driver). The emphasis given to this type of vehicle in the above clause is to provide exception only to cars, SUVs and similar other types of motor vehicles intended for transportation of persons (not more than 13 persons) and not to the other type of motor vehicles, namely Auto-rickshaw, trucks, trailers etc. The specification of motor vehicle given in the clause is only to identify a particular motor vehicle from other categories of motor vehicles to provide an exception to that specific category which is intended for that purpose, i.e for transportation of passengers. So, the law specifically mentions that such motor vehicle should be used only for the intended purpose and exceptions are available only to the three activities done using the specified motor vehicle. Those three sub-clauses where the law provides availability of input tax credit is discussed hereunder. 11. The first one at sub-clause (A) is for further supply of such motor vehicles'. The CBIC had issued a clarification in respect of admissibility of Input Tax Credit on 'demo-vehicles' in terms of in its Circular No. 231 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axpayer engaged in the line of business of 'Rent-a-cab' or Tour-operator' service. Only such taxpayers are eligible for claiming input tax credit on the motor vehicles purchased and used for the intended purpose. 14. The third sub-clause (C) imparting training on driving such motor vehicles is clearly applicable only to driving schools which are providing training on driving of all categories of motor vehicles using the vehicles purchased by them. 15. The applicant is seeking to claim the input tax credit on the ground that the motor vehicles used by them for making exhaustive analysis are after a specific retention period is sold and the applicant is of the view that it is an activity of 'supply' in the course or furtherance of business and discharges applicable GST on such transaction. The applicant has not classified the motor vehicles as capital goods in their books of accounts and hence the provisions relating to 'capital goods' shall not apply to the instant case with regard to input tax credit availment or reversal. In their submission at Exhibit-B, in para-1, they have submitted that at the end of usage or retention period, the vehicles are scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the applicant cannot claim the exception and hence are not eligible to take ITC on the motor vehicles purchased by them. 18. The applicant, in their submission has cited two Advance ruling cases namely, M/s. A.M. Motors and M/s. Chowgule Industries Pvt. Ltd with regard to eligibility of input tax credit on demo vehicles. On the very same issue, the Board has clarified vide Circular No. Circular No. 231/25/2024-GST dated 10th Sep, 2024 that the nature of activity of the taxpayers who used demo vehicles, it was clarified that those vehicles are being used by the authorized dealer only to provide trial run and to demonstrate features of the vehicle to potential buyers and hence would fall within the exception provided in sub-clause (A) as further supply of such motor vehicles under Section 17 (5) (a) of the Act, and hence the vehicle used for demo purpose would be eligible for input tax credit. We are of the view that this clarification is applicable only to demo-vehicles and not for other categories of supply of goods or services. 19. The applicant has cited another Advance ruling in the case of M/s. Narsingh Transports, wherein the taxpayer registered as 'Goods Transport Agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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