Assessee is entitled to claim ITC on vehicle modified and supplied as an ambulance

The Telangana Authority for Advance Ruling (AAR) has ruled that businesses can claim Input Tax Credit (ITC) on vehicles purchased for modification and subsequent supply as ambulances. This decision clarifies that such vehicles, even if designed for passenger transport, are eligible for ITC when used in furtherance of business, specifically for making taxable supplies like the sale of ambulances.

The AAR, Telangana inM/s. Raminfo Limited [TSAAR Order No.02/2023 dated April 03, 2023] ruled that assessee can claim Input Tax Credit ("ITC") on purchase of 7seater vehicle which will be transformed into an ambulance for further supply.

Facts

M/s. Raminfo Limited ("the Applicant") has a work order from the Government of Tripura for supply of ambulances(Mobile Common Service Centres). For this purpose, they are procuring Maruti Suzuki Eeco (7 seater) and modifying the same in their workshop in Hyderabad, Telangana State.

The Applicant filed an advance ruling before the AAR, Telangana to seek clarity on the following matter viz., rate of GST for the supply of goods, admissibility of ITC on purchase of vehicles and other components.  

Issues

Whether the Applicant is eligible to take ITC on purchase of Maruti Suzuki Eeco (7 seater) which will be transformed into an ambulance?

Held

The AAR, Telangana in TSAAR Order No.02/2023 held as under:

• Observed that, the Applicant will purchase the Maruti Suzuki Eeco (7 seater) and thereafter he will transform such vehicle into an ambulance and will supply such ambulances to the Government of Tripura.
• Noted that, the purchased vehicle falls under HSN 8703 which inter alia covers "Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702)".
• Further noted that, as per Section 17(5)(a) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") the ITC on purchase of vehicles which are meant for further supply is not a blocked under Section 17(5) of the CGST Act.
• Held that, the Applicant is eligible to take ITC of tax paid on purchase of vehicle which is used in furtherance of his business and the Applicant will charge GST @ 28% as per Schedule IV of the Notification 01/2017-Central Tax (Rate) dated June 28, 2017 ("Goods rate notification") on supply of ambulance to the Government of Tripura.

Relevant Provisions

Section 17: Apportionment of Credit and block credit

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5. Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles.

The Goods rate Notification

Schedule IV: