GST UPDATE
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Input Tax Credit Eligibility for Motor Vehicle Services
Let’s delve into the refined guidelines surrounding the eligibility of Input Tax Credit (ITC) concerning services like maintenance, insurance, and repair of motor vehicles, expanding on discussions from a previous article.
The Central Goods and Services Tax (CGST) Amendment Act of 2018 introduced a significant change by adding section 17(5)(ab). This amendment categorically places ITC for services related to general insurance, servicing, repair, and maintenance of motor vehicles in the blocked credits list, under two conditions:
· The vehicle is used for transporting individuals.
· It seats no more than thirteen people, driver included.
Therefore, ITC claims for such services on vehicles, even those purchased for business use, are now restricted following the 2018 amendment.
It's important to highlight that this amendment became effective from February 1, 2019. The introduction of clause 17(5)(ab) is not retroactive, distinguishing it from certain other sections of the original act. This means ITC for motor vehicle services was claimable up to January 31, 2019, without these restrictions. The limitations only apply from February 1, 2019, forward.
Exemptions to the ITC Restrictions Post-Amendment
Upon reviewing the amended legislation, certain exceptions where ITC on motor vehicle repair or insurance services remains claimable have been identified, provided other ITC eligibility criteria are met:
1. Vehicles designed to transport more than 13 individuals, such as buses.
2. Vehicles specifically intended for goods transportation, like trucks.
3. Vehicles utilized for taxable supplies including:
· Reselling the vehicle (e.g., car dealerships).
· Passenger transportation services (e.g., taxi services).
· Driving instruction services (e.g., driving schools).
4. Services availed by a taxable entity involved in:
· Manufacturing those vehicles.
· Providing general insurance services for vehicles they insure.
Outside of these specified scenarios, ITC for motor vehicle repair or insurance services is not permissible after February 1, 2019.
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