ITC on CAR Service

Motor vehicles & conveyances

ITC is not available for motor vehicles and conveyances.

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

Exceptions to ITC on motor vehicles

ITC will be available when the vehicle is used for the following.

a) Supply of other vehicles or conveyances

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

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).

The restriction in section 17(5) is only for motor vehicles and other conveyances and NOT FOR THE SERVICES RELATED TO THEM.

There is no restriction on the services in relation to motor vehicles. The services have not been mentioned and cannot be equated to supply of motor vehicles or other conveyance. This is the principle of ejusdem generis. The use for the furtherance of business, however, has to be satisfied. 

The Motor vehicles GST credit is available for GTA who is paying GST on full amount of 12%. NO credit to those who are not paying and expecting the customer to pay at 5% on Reverse Charge Mechanism. Also for those reselling ( they have to charge again) + providing transportation services on which GST paid, those imparting driving training, those using the MV for transportation of their goods.   

Yes... ITC available for Car Service Expenses