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

Meera Textiles Pvt Ltd, a registered manufacturer in Surat, buys a hatchback car with approved seating capacity of 5 persons (including the driver) for use by its directors. The car is not used for further supply, passenger transportation or driving training. Under the CGST Act, 2017, the input tax credit on this car is:

Credit is blocked. Motor vehicles for carrying persons with seating capacity of up to thirteen including the driver are ineligible under section 17(5)(a), unless used for further supply, passenger transport or driving training. Mere business use by directors does not qualify as an exception.

  1. AAllowed in full because the car is used in the course of business
  2. BAllowed at 50% since it is partly personal
  3. CBlocked, because the car seats not more than thirteen persons and is not used for the permitted purposesCorrect
  4. DBlocked only if the car is registered in a director's name

Explanation

Section 17(5)(a) blocks credit on motor vehicles for transporting persons with approved seating capacity of not more than thirteen including the driver. The exceptions (further supply, passenger transport, driving training) do not apply here. Option A ignores the overriding blocked-credit provision, which applies even to business use.

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