GST Input claim on Car purchase for business purpose

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GST ITC on car purchase and insurance is generally not allowed if the vehicle is for passenger use up to 13 seats. It must be capitalized. ITC is allowed only in specific cases like resale, passenger transport, training, or goods transport.

BALAMURUGAN GOPAL

BALAMURUGAN GOPAL (Querist)
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05 January 2023 Hi Everyone

Please answer my question as below.

Can we claim GST paid on purchase of car and on car insurance?

Kindly help.

Thanks in advance.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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05 January 2023 No. It has to be capitallized.

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BALAMURUGAN GOPAL

BALAMURUGAN GOPAL (Querist)
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05 January 2023 Hi Dhirajlal Rambhia sir

Thanks for your valuable comment.

If possible can you provide with section explanation?

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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05 January 2023 ITC is not available for Motor vehicles used to transport persons, having a seating capacity of less than or equal to 13 persons (including the driver). However, ITC is available if the seating capacity of such motor vehicles exceeds 13 persons. Further, ITC is not available on vessels and aircrafts.

For example, A Co. buys a car for their business. They cannot claim ITC on the same.

Exceptions to ITC on motor vehicles/vessels/aircrafts:

ITC will be available when the vehicle is used for making taxable supplies by the following.

a) Supply of other vehicles or conveyances, vessels or aircrafts.

If you are in the business of supplying cars then ITC will be available.

For example, a car dealer purchases a car for Rs.50 lakh plus 14 lakh GST (ignoring cess calculations). The same car was later sold for 70 lakhs along with Rs.19.60 lakh GST. Since he is a dealer, he can claim ITC of 14 lakhs and pay only Rs.5.60 lakh (19.60 – 14).

b) Transportation of passengers

If you are providing transportation of passengers then ITC will be allowed on the vehicle purchased.

For example, Happy Tours purchased a bus for inter-city transport of passengers. ITC is available.

c) Imparting training on driving, flying, navigating such vehicle or conveyances or vessels or aircrafts, respectively.

A driving school purchases a car to give training to students. The school can claim ITC on the GST paid on the car.

d) Transportation of goods

ITC will be allowed on motor vehicles (and other conveyances) used to transport goods from one place to another. However, this is concerning other transporters and not goods transport agencies (GTA).

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BALAMURUGAN GOPAL

BALAMURUGAN GOPAL (Querist)
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05 January 2023 Thanks for your time and reply sir.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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05 January 2023 You are welcome..

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