GST is not easy I think you all also agree, and Section 17(5) of the CGST/SGST Act is a tough one to understand
Well after reading the bare act, various articles of other GST experts and consulting with other GST Consultants I have tried answering some queries related to Blocked Credit in respect of Motor Vehicles and other conveyances.
Section 17(5) reads as follows
(5) Not withstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(a) motor vehicles and other conveyances except when they are used -
(i) for making the following taxable supplies, namely:-
(A) further supply of such vehicles or conveyances; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for the transportation of goods;
Question 1: Company A is in Trading/Manufacturing Business. They have purchased a truck to transport goods to its customers. Can it avail the credit of GST it has paid on such Vehicle purchased?
Answer1: As per my view the credit can be availed as the Vehicle is used for Transportation of goods. Therefore the same is in compliance with the exception provided by Section 17(5).
Question 2: Company A also purchased a car for use by its employees in the discharge of their duties or otherwise. Can it avail the credit of GST it has paid on such car purchased?
Answer2: The answer is No as the car purchased is not used for any of the purposes specified above that is neither the car is used for further sale(as Company A is in Trading of goods) nor Company A is in business of Transportation of passengers nor Company A is business of imparting training of driving such Car and nor the car is used in Transportation of goods.
As none of the condition is fulfilled, there is no GST Credit availability.
Question 3: Now the third question that may come to ones mind is that whether GST credit of repair/insurance of the abovesaid truck or car available?
Answer 3: As per my view the GST credit of repair /insurance of the Truck shall be available but not of the car.In support of my view, I shall depend on the wording of Section 17(5) which says ‘’tax credit shall not be available in respect of following, namely………..”The words in respect of shall include purchase, repair, insurance and all related expenses to such vehicle or conveyance.
So if credit is available of GST on Vehicle purchased, then Credit on all expenses related to that vehicle shall be available.
Further, if credit is not available of GST on Vehicle purchased, the credit on all expenses related to that vehicle shall also be blocked.