ITC on Car loan processing charges

ITC / Input 267 views 2 replies
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Accountant
189 Points Joined January 2009

If a Pvt. Ltd. company purchase motor car with less than 13 seater, as per section 17(5) ITC is not available. But the car is purchased through bank loan and bank issued gst invoice for loan processing charges.

whether itc is available or not for this loan processing charges?

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On 14 May 2025 at 19:36 Report
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Master in Accounts & high court Advocate
9113 Points Joined December 2011

You can claim Input Tax Credit (ITC) on loan processing charges, despite Section 17(5) blocking ITC for goods or services related to immovable property or certain vehicles. Here's why.

*Loan Processing Charges are Separate*: Loan processing charges are considered a financial service, and GST is applicable on these charges. Since interest on loans is exempt from GST, but processing fees and other charges are subject to GST at 18%, ITC can be claimed on these charges. - 

*Not Directly Related to Motor Car Purchase*: The restriction on ITC for motor cars with less than 13 seats doesn't directly apply to loan processing charges. These charges are more related to the financial service provided by the bank rather than the purchase of the vehicle itself. - 

*Eligibility Depends on Business Purpose*: To claim ITC, the loan should be used for business purposes, and the company should be registered under GST. Since your Pvt. Ltd. company is using the loan for business, you should be eligible to claim ITC on loan processing charges. 

*Conditions to Claim ITC*: - *Tax Invoice*: Ensure the bank provides a tax invoice for the loan processing charges. -

*Business Purpose*: Verify that the loan is used for business purposes. - *GST Return Filing*: File your GST returns under Section 39 of the CGST Act. ⁰

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On 15 May 2025 at 10:29
User Avatar

Master in Accounts & high court Advocate
9113 Points Joined December 2011

You can claim Input Tax Credit (ITC) on loan processing charges, despite Section 17(5) blocking ITC for goods or services related to immovable property or certain vehicles. Here's why.

*Loan Processing Charges are Separate*: Loan processing charges are considered a financial service, and GST is applicable on these charges. Since interest on loans is exempt from GST, but processing fees and other charges are subject to GST at 18%, ITC can be claimed on these charges. - 

*Not Directly Related to Motor Car Purchase*: The restriction on ITC for motor cars with less than 13 seats doesn't directly apply to loan processing charges. These charges are more related to the financial service provided by the bank rather than the purchase of the vehicle itself. - 

*Eligibility Depends on Business Purpose*: To claim ITC, the loan should be used for business purposes, and the company should be registered under GST. Since your Pvt. Ltd. company is using the loan for business, you should be eligible to claim ITC on loan processing charges. 

*Conditions to Claim ITC*: - *Tax Invoice*: Ensure the bank provides a tax invoice for the loan processing charges. -

*Business Purpose*: Verify that the loan is used for business purposes. - *GST Return Filing*: File your GST returns under Section 39 of the CGST Act. ⁰

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On 15 May 2025 at 10:29


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