Section 17 of the CGST Act, 2017 (prior to being amended vide CGST (Amendment) Act, 2018] contains a list of goods and services, in respect of which input tax credit is blocked. This article is confined to the blockade of input tax credit in respect of Motor vehicles and other conveyances.
As per the pre-amended clause (a) of sub-section (5) of section 17 of CGST Act, 2017, input tax credit is not be available in respect of the following, namely:-
Motor vehicles and other conveyances except when they are used–
for making the following taxable supplies, namely:-
- further supply of such vehicles or conveyances ; or
- transportation of passengers; or
- imparting training on driving, flying, navigating such vehicles or conveyances;
for transportation of goods.
The aforesaid section raised a prudent question that what is the meaning of the term 'Motor vehicles' and whether this term will include construction equipment vehicles (Excavators (tyre mounted), Dumpers, Tippers, Road Rollers, Cranes etc.). The second question, which emerged, was that even if such equipment vehicles fall under the ambit of 'Motor Vehicles', won't these be treated as being 'used for transportation of goods'? In short, there are different questions and opinions on the issue of eligibility of ITC on purchases of construction equipment vehicles. Here it is worth to mention that some of the construction equipment vehicles are also treated as mining equipments.
The question on eligibility for input tax credit on purchase of such equipment vehicles was also addressed in a sectorial FAQ. The Director General of Excise & Customs, CBEC has issued a GST FAQ on Mining Sector and has responded the question of Input Tax Credit on purchases of all earth moving machinery in the following words:-
Q. No. 21:- Will GST charged on purchase of all earth moving machinery including JCB, tippers, dumpers by a mining company be allowed as input credit?
Answer: - The provision of Sec. 17(5) (a) of the CGST Act, 2017 restricts credit on motor vehicle for specified purposes listed therein. Further, in terms of the provision of Section 2(76) of the CGST Act, 2017 the expression 'motor vehicle' shall have the same meaning as assigned to it in Clause (28) of Section 2 of the Motor Vehicle Act, 1988, which does not include the mining equipment, viz., tippers, dumpers. Thus, as per present provisions, the GST charged on purchase of earth moving machinery including tippers, dumpers used for transportation of goods by a mining company will be allowed as input credit.'
A similar question regarding availability of Input tax Credit on Vehicles (Pokland, JCB, Dumper &, Tipper) used for movement of goods in its place of business was put before the Authority for Advance Ruling, Uttarakhand. While responding to the said query of M/s. Purewal Stone Crusher, the AAR, Uttarakhand, in ruling no. 8/2018-19, dated 11-9-2018, took the support of the aforesaid FAQ and observed as follows:-
'……………….. as per Section 17(5)(a) of the Act, Input Tax Credit shall not be available on 'motor vehicle', unless it is used for specified purpose, viz transport, training etc., listed therein. One very important thing in the said section is the definition of the term 'Motor Vehicle' under GST. It generally take it to mean that all types of vehicles, as nowadays everything is run by motor. But as per Section 2(76) of the Act the expression 'motor vehicle' shall have the same meaning as assigned to it in clause (28) of Section 2 of the Motor Vehicles Act, 1988. We observe that definition in clause (28) of Section 2 of the Motor Vehicles Act, 1988 is an extensive definition which includes all kinds of mechanically propelled vehicles including a trailer. The scope of the Motor Vehicles Act is to bring into its fold all kinds of moving objects plying on the roads under its ambit so as to provide safety measures and regulate traffic. Therefore, any objects which moves on the road by itself requires registration under the Motor Vehicles Act.
Now, when we look at that definition, it does not include the vehicles used as mining equipment, like, tippers, dumpers etc. Therefore, under the provisions of GST law, the GST paid on purchase of 'Pokland, JCB, Dumper & Tipper' used for transportation of goods will be allowed as ITC.'
From the above FAQ and AAR, two important points have been emerged, which needs further consideration:-
- The definition of Motor vehicle does not include the vehicles used as mining equipments.
- Pokland and JCB are used for transportation of goods.
In this article, we will discuss both the above findings, because we cannot ignore that FAQ is not binding on any one and that rulings of AAR is not binding on authorities other than the applicant officer and the jurisdictional officer.
Whether the term 'Motor Vehicle' under SGST Laws includes mining equipments such as tippers, dumpers etc. in its ambit?
Both the authority has mentioned, without any supporting materials, that clause (28) of Section 2 of the Motor Vehicle Act, 1988, does not include the mining equipment. I could not agree with the aforesaid views of the authorities.
Section 2(28) of the Motor vehicles Act, 1988 defined Motor vehicles as:-
'motor vehicle" or "vehicle" means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty-five cubic centimetres;
I fails to find any clue in the above definition on the basis of which I can agree with the views of the aforesaid authorities. The question 'Whether Dumpers, Rockers and Tractors are motor vehicles within the meaning of the relevant State Motor Vehicles Taxation Acts, and are accordingly taxable thereunder' knocked the door of the Apex Court in the case 'Bolani Ores Limited etc vs State Of Orissa Etc [1975] SCR (2) 138'. In the said landmark judgment, the Apex Court had held that vehicles used in the mining premises fall outside the definition of 'motor vehicle' and could not be subjected to tax under the then motor vehicles taxation Acts. But that is only one part of the judgment. It will be improper to read the judgment in part. While passing the order, Apex court has also distinguished the two definitions of the term 'Motor Vehicles' provided under the Motor Vehicles Act, 1938 and the Motor Vehicles Act, 1956. For the sake of reference, both the definitions are reproduced here-in-below.
The Motor Vehicles Act, 1939 defined Motor Vehicles in the following words:-
'motor vehicle" means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or used solely upon the premises of the owner.
The Motor Vehicles Act, 1956 defined Motor Vehicles in the following words:-
"motor vehicle" means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special, type adapted for use only in a factory or in any other enclosed premises.
Their lordships had observed 'before the amendment a motor vehicle though a motor vehicle within the meaning of the first part of the definition is nonetheless not so, because of its specified user, i.e. if it is used solely upon the premises of the owner. These vehicles under s. 6 of the Taxation Act read with s. 2(c) thereof would not attract liability to tax. But after the amendment though a motor vehicle may be adapted for use upon roads, nonetheless in order to be taken out of the category of the definition it had to be further adapted, namely, it should be a vehicle of a special type adapted for use only in a factory or in any other enclosed premises. In other words, a motor vehicle of a special type adapted as stated in the post amendment definition would be such as would not be considered to be adapted for use upon roads.' It has been held in the said judgment that the construction equipment vehicles mentioned therein, which are adapted for use upon roads, falls under the ambit of the term 'Motor vehicles' as per the amended definitions (amended by the Act of 1956).
Being the definitions under the MV Act, 1988 is similar to the definitions of MV Act, 1956, it appears that same ratio will be applicable for the purpose of section 17 of CGST Act. The fact that the judgment has held that those vehicles/ equipments were not taxable by different Acts for taxation on vehicles, does not affect the current scenario.
In addition to the above, in the case of 'Central Coal Fields Ltd. v. State of Orissa and Ors., 1992 Supp (3) SCC 133', the Apex Court held that Dumpers and Rockers are Motor vehicles as per Motor vehicle Act, 1988. It was observed that the mere fact that the Dumpers or Rockers as suggested are heavy and cannot move on the roads without damaging them is not to say that they are not suitable for use on roads. The word `adapted' in the provision was read as `suitable' in Bolani Ores case by interpretation on the strength of the language in Entry 57, List-II of the Constitution. Thus on that basis it was idle to contend on behalf of the appellants that Dumpers and Rockers were neither adaptable nor suitable for use on public roads.
Similarly, the Apex court in the case 'Bose Abraham v. State of Kerala (2001) KTR 366' hold that the excavators and road rollers are motor vehicles for the purpose of the Motor Vehicles Act.
Unless and otherwise it has been held that the context of section 17 requires otherwise and the definition as provided in clause 76 of section 2 is not applicable, it appears that construction equipment vehicles such as tyre mounted excavators, dumpers, Road Rollers, Cranes etc. will be treated as 'Motor vehicles'. It is immaterial, in my opinion that these are capital goods or these equipment falls under the ambit of plant & machineries.
Whether these vehicles are used for transportation of goods?
Even if aforesaid vehicles falls under the ambit of 'Motor Vehicles', ITC is allowable if the same are used in transportation of goods. The question arouse that whether all of the above equipments are used actually used in transportation of goods?
To begin with, we can straight forward say that 'Road Rollers', 'Bulldozers' etc. are not used for transportation of goods. Similarly, it can be easily accepted that 'Dumpers', 'Tippers' etc. are mainly used for transportation of goods. However there are difference of opinions on the issue that whether excavators, JCB, dozers, pokland, cranes etc. are actually used for transportation of goods or not. Main functions of such vehicles are not of the transportation of goods, but at the same time it cannot be denied that these vehicles factually move goods from one place to another place. It has also been argued that a tax practitioner's car is also being used for transporting of files and books, which also comes under the purview of goods. I refrains from making any comment on the said argument. Food delivery bikes, whether used for transportation of food may be a good case to claim ITC. In nut and shell, this is a complex issue and it is apprehended that it may cause numbers of litigations.
Conclusion:-
- Despite of the views forwarded by the different authorities in FAQ and AAR, construction equipment vehicles, which are adaptable for use on roads falls under the ambit of the term 'Motor vehicle'.
- The term 'used for transportation of goods' is yet to be defined and in absence of any such definition or well considered explanation, this term is going to cause numbers of disputes and litigation.
- It appears that putting such restriction of input tax credit on construction equipment vehicles, mining equipment vehicles could not be the intention of the law makers. I fail to guess any reason for denying input tax credit on the said assets. It sounds illogical that a contractor, who is eligible for claiming ITC on purchase and maintenance of Air Conditioner, Computers, Furniture and all types of machines and equipments is debarred from getting ITC on construction equipment vehicles, which are more directly associated with supply of taxable services. It appears to be an unintentional lapse, which has been rectified vide the GST amendment Act, 2018.
Council may please consider the problems of the contractors and accordingly may propose to give retrospective effects to the amendments made in respect of section 17(5)(a). Thus the amended and newly inserted provisions of clause (a), (aa) and (ab) of sub-section (5) of section 17 needs to be given retrospective effect, and if it is done, it will be certainly fair and logical and will be in the interest of the justice.
The author can also be reached at fca.opg@gmail.com
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