Whether the GST paid on the cars provided to different customers on lease rent will be available to the applicant as Input Tax Credit in terms of Section 17(5) of the Central Goods and Services Act 2017’ ?

PJ/Case Law/2018-2019/3533

Case :M/s. Narsingh Transport(AAR GST Madhya Pradesh)

Citation: : Case Number-25/2018 and Order dated on 18.02.19

Issue:‘Whether the GST paid on the cars provided to different customers on lease rent will be available to the applicant as Input Tax Credit in terms of Section 17(5) of the Central Goods and Services Act 2017’?

Brief Facts: The Applicant is registered with the Department for providing “Goods Transport Agency Service” it is availing option to pay tax @12% and availing ITC facility on vehicle and their spares used for providing GTA service as well as on inward services namely insurance of vehicles and repair and maintenance of vehicles.

Appellant Contention:
The Applicant is providing “Goods Transport Agency Services” and is charging GST on outward supply of goods transport agency service @ 12 %.The inward supply of the goods and services on which full ITC is being claimed by the applicant is for maintenance repairing service being used for smooth running of vehicles meant for providing GTA service and for Spare & accessories goods being purchased for maintenance of vehicles.
The applicant has expressly purchased cars for furtherance of their business i.e. for providing to other entities on a monthly lease rent under proper lease agreement and will not claim depreciation on these vehicles under Income Tax Act.1961
Respondent’s Contention and Reasoning of Judgment:
Section 16. Eligibility and conditions for taking input tax credit. — (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
Section 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :-
1. After GST Act amendment 2018 —
Motor vehicle for transportation of person having approved seating capacity of not more than thirteen person(including the driver), except when they are used for making the following taxable supplies one of which is for further supply of such motor vehicles or
2. Before the above amendment
Motor vehicles and other conveyances except when they are used for making the following taxable supplies one of which is further supply of such vehicles or conveyances
Thus it is absolutely clear that in respect of motor vehicles, except in certain circumstances, the Input Tax Credit is not available. In the present case before us is that the Applicant is providing cars on Lease Rent to their customers for carrying passengers and hence not covered by the exception as provided in clause (B){transportation of passengers) and (C){imparting training, driving….etc.}of sub section 5(a) after the amendment and in clause (B) and (C) of sub section5 (a)(i) before the amendment as well as in Sub section 5 (a) (ii) of Section 17 before the amendment.
Since “taxable supply” & “further supply” finding a place in the said sub-sections are of great importance in this case .As per Section7- definition of “supply” includes All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
It is found that Applicant is supplying goods i.e. cars and services i.e. lease rent services against a monthly monetary consideration in the course of applicant’s business in taxable territory and supplies are taxable in nature and Applicant is registered under GST Act.
In the light of the facts as discussed, the activities carried by the Applicant regarding supply of tax paid motor vehicles on monthly lease rent plus Tax as applicable to their customer under a proper agreement properly satisfies the conditions laid down under Section 17(5) (a) (i) (A) before the amendment and under subsection 5(a)(A) after the amendment to make it eligible for availment of input tax credit on motor vehicle. The applicant has complied with the all the requirements for filing this application as lay down under the law. We therefore admit the application for consideration on merits. . Thereby the appellant is entitled to claim INPUT TAX CREDIT.

Decision: Application allowed.

Comment: The Gist of the case is that the applicant has purchased cars which have been leased for furtherance of business. The applicant is of opinion of availing Input tax credit on cars purchased being leased as a furtherance of business. It is also necessary to mention that the cars, which the applicant intends to lease, or has already leased, should be registered with the transport authority in the capacity of commercial use. In case the vehicle is owned and used by the Applicant for his own use, the facility of ITC shall seize to be available to them. After studying applicable provisions the judgment is in favor of applicant entitling him the benefit of input tax credit.

Prepared by:SANDHYA DAIYA

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PJ/Case Law/2018-2019/3533

Case :M/s. Narsingh Transport(AAR GST Madhya Pradesh)

Citation: : Case Number-25/2018 and Order dated on 18.02.19

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