Skip to content

CS Executive · Tax Laws and Practice · Input Tax Credit and Computation of GST Liability

Bharat Traders Pvt Ltd, a registered dealer, buys a car with seating capacity of 5 persons including the driver for use by its directors. The car is not used for further supply, passenger transport or driving training. Under the blocked credit provisions of the CGST Act, 2017, the input tax credit on this car is:

Input tax credit is not available. A five-seater car is a motor vehicle with approved seating capacity of not more than thirteen persons including the driver, and credit is blocked unless it is used for further supply, passenger transport or driving training.

  1. AAllowed in full because the car is used in the course of business
  2. BAllowed in the ratio of business use to personal use
  3. CNot available, because motor vehicles with seating capacity of not more than thirteen persons are blocked unless used for specified suppliesCorrect
  4. DAllowed at 50% of the tax paid and the rest lapses

Explanation

Credit on motor vehicles for transportation of persons with approved seating capacity of not more than thirteen persons (including the driver) is blocked. The exceptions are further supply, passenger transport or driving training, and none applies here. Hence the 'business use' option is wrong, as the block applies notwithstanding section 16.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit and Computation of GST Liability shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax Credit and Computation of GST LiabilityFree diagnostic mock

More Input Tax Credit and Computation of GST Liability questions