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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Meridian Textiles Ltd, a registered manufacturer, buys a passenger car (seating capacity of 5 including the driver) for use by its directors. The car is not used for further supply, passenger transport or driving training. Under Section 17 of the CGST Act, 2017, what is the position on input tax credit (ITC) on the car?

ITC is blocked. Section 17(5)(a) denies credit on motor vehicles for transporting persons with seating capacity of not more than thirteen including the driver. Because the car is not used for further supply, passenger transport or driving training, no exception applies, and business use alone is not enough.

  1. AITC is blocked because it is a motor vehicle for transporting persons with seating capacity of not more than thirteen, and none of the exceptions appliesCorrect
  2. BITC is allowed in full because the car is used in the course of business
  3. CITC is allowed at 50% because the car is a capital good
  4. DITC is allowed only if the car is capitalised in the books

Explanation

Section 17(5)(a) blocks ITC on motor vehicles for transporting persons with approved seating capacity of not more than thirteen including the driver. The exceptions are further supply, transportation of passengers and driving training, and none applies here. Business use alone does not unblock the credit.

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