ITC in case of motor vehicle including blocked credit

Divyanshu Sharma | Last updated: 17 April 2023

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Quick Summary

This article clarifies the rules around claiming Input Tax Credit (ITC) for motor vehicles. Generally, ITC is blocked for vehicles with a seating capacity of 13 or fewer, and for related services like insurance and repairs. However, exceptions apply if the vehicle is used for further supply of vehicles, passenger transport, or driving instruction. ITC is permitted for vehicles designed to carry more than 13 people or those used for transporting goods, including associated services.

1) Motor Vehicle used for transportation of Persons

(A) ITC is blocked for motor vehicles have approved seating capacity ≤ 13 persons (including the driver)

ITC is also blocked on certain services relating to motor vehicles like insurance, servicing and repair & maintenance.

Motor Vehicle ITC: Blocked Credit Explained

Motor Vehicle used for transportation of Persons

BUT, there are some exceptions to point (A) i.e. if motor vehicle is used for:

(i) Making further taxable supply of motor vehicles.
(ii) Making taxable supply of transportation of passengers.
(iii) Making taxable supply of imparting training on driving such cars.

Then, ITC is available.

(B) ITC is allowed if motor vehicle have approved seating capacity of >13 person

In this case, ITC is also allowed on certain services relating to motor vehicles like insurance, servicing and repair & maintenance.

2) Motor Vehicle is used for transportation of goods

ITC is allowed for Motor Vehicle used for transportation of goods.
ITC on certain services relating to motor vehicles like insurance, servicing, and repair & maintenance are also allowed.

Motor Vehicle is used for transportation of goods