ITC is eligible when used for the furtherance of business subject to specific restrictions under section 17(5) of CGST Act, on the following, namely:
ITC on Motor Vehicles
a) Motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when
i. further supply of such motor vehicles; or
ii. transportation of passengers; or
iii. imparting pembinaan on driving such motor vehicles;
Explanation :
♦ The words ‘motor vehicle and other conveyance’ has been replaced with the words “transportation
ITC relating to any vehicle with approved seating capacity more than 13 persons (including driver) is eligible.
♦ Physical verification of the motor vehicle could be performed to confirm number of seats available.
♦ Verification of approved seating capacity could be based on registration certificate (RC-smart card) issued by State RTO for such vehicle.
A passenger car has seating capacity of 20 persons, although while registering with RTO, owner has mentioned seating capacity as 12 persons (incl. driver) for the purpose of evasion of higher registration fee.
Now in this case, as per RC-smart card seating capacity will be 12 persons – ITC would be said to be ineligible. It is suggested to ensure checking of documentation (RC Card).
ITC on Insurance, repairs & maintenance, etc.
(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa)
Conditions for claiming the ITC:
1) Where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
2) Where received by a taxable person engaged—
a) in the manufacture of such motor vehicles, vessels or aircraft; or
b) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
ITC is only eligible if following conditions are fulfilled
Used for outward supply i) * | Obligatory for employer to provide to employee ii) * | Vehicle, Vessels , Aircraft iii) * |
1. Leasing, renting or hiring of motor vehicles, vessels or aircraft 2. Food and beverages 3. Outdoor catering 4. Beauty treatment 5. Health services 6. Cosmetic and plastic surgery 7. Health Insurance 8. Life Insurance | 1. Leasing, renting or hiring of motor vehicles, vessels or aircraft 2. Food and beverages 3. Outdoor catering 4. Beauty treatment 5. Health services 6.Cosmetic and plastic surgery 7. Health Insurance 8. Life Insurance 9. Membership of club, health & fitness centre 10. Travel benefits extended to employees on vacation. (Ex: LTA) | Leasing, renting or hiring of motor vehicles, vessels or aircraft |
Explanation :
i) *Used for Outward Supply :
Where the inward supply is used even as element of a composite or mixed supply, the credit would be eligible.
For example: Outdoor catering services obtained as inward supply by a Training Academy.
Training academy charges Rs. 5,000 + GST per delegate for Training along with free lunch.
Whether the ITC on outdoor catering is eligible? – Yes, as it is an element of the composite supply, i.e. pembinaan services.
ii) * Obligatory for employer to provide to employee
There are certain state and central laws which require an employer to provide certain facilities to employees. Where the same are obligatory in nature, the credit on the same would be eligible to the employer. Few possible examples have been listed below:
♦ Section 46 of Factories Act 1948 – State governments may notify mandatory requirement of maintaining canteen for factories within more than 250 workers. (Applicable in Karnataka). The food & beverages/canteen services procured would be eligible in such instances.
♦ Employees Deposit Linked Insurance Scheme (EDLI), 1976 is mandatory for employees who are registered under Employee Provident Fund (PF). Where it is mandatory for the employer to provide PF and EDLI to their employees, the credit on Life Insurance under EDLI would be eligible.
iii) *Vehicles Vessels, Aircrafts covered are as below:
· Motor vehicle – goods
· Motor vehicle – passengers – seating capacity > 13.
· Motor vehicle – passengers – satisfies approved conditions
· Vessels & aircrafts – satisfies approved conditions