Section 17(5) of gst act

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26 April 2018 a proprietor has purchased car worth Rs. 50 lacs and paid GST on it. Now the proprietor always accompany with him team of atleast 5-6 persons, as it his need of profession, So can he claim ITC on car used in his profession/business.

As it is written in sec. 17(5) of CGST Act that itc shall be admissible if motor vehicle is used in "transportation of passengers".

Passenger means a person who is travelling. According to oxford dictionery, passenger means "A traveller on a public or private conveyance other than the driver, pilot, or crew"

So According to me above person satifies the condition of sec. 17(5) and ITC is admissible. Show your opinion on this issue.

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02 May 2018 No credit on motor vehicle will not be allowed as it is not your business to provide transportation of passenger

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08 May 2018 But the bare act does not say that business should be of transportaion, It only says that vehicle should be used for transport of passengers only, passenger can be of any business organisation.

Asha Kanta Sharma

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23 July 2025 Section 17(5) of the GST Act: ITC on Motor Vehicles
The issue revolves around whether the Input Tax Credit (ITC) can be claimed by a proprietor on a car purchased for professional/business use under Section 17(5) of the CGST Act, particularly given that the vehicle is used to carry a team of 5-6 persons in the course of his profession.

Let's break down the relevant section and the conditions under which ITC can be claimed.

1. Overview of Section 17(5) of the CGST Act
Section 17(5) of the CGST Act specifies the items for which Input Tax Credit (ITC) is not allowed. However, there are certain exceptions that allow for ITC claims, depending on the use of the items.

For motor vehicles, Section 17(5)(a) specifically states:

"No ITC shall be allowed on the motor vehicle and other conveyance except where the motor vehicle is used:

For transportation of passengers (e.g., a taxi or a bus), or

For transportation of goods (e.g., a truck), or

For further supply of such motor vehicles (i.e., sale or leasing of vehicles as part of the business)."

2. Can ITC Be Claimed on a Car Used for Business?
The key question is whether the purchase of the car for business purposes qualifies for the exception under Section 17(5), where ITC is allowed if the vehicle is used for the "transportation of passengers".

Interpretation of "Transportation of Passengers":
The "transportation of passengers" condition is typically understood to refer to vehicles used for commercial transportation services, such as taxis, buses, or other vehicles used to provide transport services to the public.

"Passenger" as defined in the Oxford Dictionary refers to:

A traveller on a public or private conveyance, other than the driver, pilot, or crew.

In this context, if the team of 5-6 persons is part of the professional work, such as employees or associates of the business, they do not qualify as "passengers" in the conventional sense used for public transport services.

Does a Team of Employees Qualify as "Passengers"?
In the scenario you've described, the proprietor is using the car to transport a team of 5-6 persons, but they are not passengers in the typical sense. They are likely employees or associates engaged in the business of the proprietor.

While the employees or team members are traveling in the car, the vehicle is being used to transport them for business purposes rather than providing commercial transport services to the public. Therefore, this does not meet the strict interpretation of "transportation of passengers" under Section 17(5).

3. Is ITC on the Car Allowed?
Given the above considerations, the ITC claim on the car in this case is likely not admissible. The car is not being used for the transportation of passengers in the conventional sense as required under Section 17(5).

Reason:
Section 17(5) specifically denies ITC on motor vehicles used for personal or business purposes that do not involve the transportation of passengers or goods.

The vehicle is not being used in the course of providing transportation services but rather for internal business travel, which does not qualify under the exception.

4. Exceptions:
There are a couple of exceptions where ITC on motor vehicles can be claimed:

If the vehicle is used for "further supply", such as in the business of selling, leasing, or hiring motor vehicles, or

If the vehicle is used for transportation of goods or for public transport services.

In your case, if the car is used for purely internal business purposes (transporting employees or for personal business needs), ITC is not allowed.

5. Case Law & Precedents
While there might not be any case law directly on this specific issue, there are rulings that clarify that ITC is only available when the vehicle is used for commercial passenger transport or for sale in the business of vehicles. Personal or internal business use does not qualify.

Conclusion
ITC on the car purchased for business use is not admissible under Section 17(5) of the CGST Act, as the vehicle is not used for the "transportation of passengers" in the typical sense of public transport or commercial services.

Even though the vehicle is used to transport a team of employees, it does not qualify for the exception under Section 17(5) for ITC.

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