If your auto log shows business use is between 10% and 90% , you can claim 5/105ths of the capital cost allowance of the personal vehicle (CCA) claimed in the year. In view of-the facts and the legal provisions stated above, it was held by the Authority for Advance Rulings that the credit of GST paid on purchase of motor vehicles or other inputs for the supply of the "rent-a- cab" service is not admissible. Further, input tax means tax paid on goods or services. Further more, rate to leasing service would be at par with rate applicable to goods. Since the motor vehicles for transportation of persons is blocked, therefore the vehicle for transportation of goods will always be available for input tax credit. Professional Course, Online Excel Course Further notional amount of interest on security deposit would be included in value , only if it influences the monthly rent. A fairly simple concept, but the claiming thereof is subject to certain documentary requirements. Even though in case car taken on lease it become leasing services but it is leasing of motor vehicle service. When car is taken on lease it would become services specifically leasing services. However, section 17(5) state that input tax credit in respect of motor vehicle is not available. Section 17 of the Central Goods and Service Tax (CGST) Act deals with Apportionment of credit and blocked credits, wherein Clause (5) of the said Section provides for restriction of credit. Introduction. for dealers and rental firms; and – Subscriptions for social and sporting clubs. It is a TAX CREDIT and not INPUT TAX CREDIT, which is granted in respect of motor vehicles stated in Regulation 14(5) and 14(6A). Professional Course, Course on GST Exports With effect from 1 May 2004, all vendors claiming a notional input tax credit in respect of the acquisition of second-hand goods or repossessed goods are required to complete a VAT 264 form and retain such form for a period of 5 years from the date of sale. vehicle dealer members, the notional input tax credit scheme has instead generated substantial additional costs for small businesses and complicated compliance issues for motor vehicle dealers, who are the largest single sector dealing in used goods. Input Tax Credit system under GST, has its origin in the system of destiny based Consumption Tax popularly known as Value Added Tax (VAT) in Developed Economy. The assessee provides cab rental service to various institutions and in no case such services provided to institutions can fall under "passenger transportation services". In the old e-filing template of Maharashtra, for composition tax, there was a provision to capture the deduction of 85% of the sale value from sale of second hand motor vehicles as only 15% of the total sale value was taxable. 4. Further, the services provided by bus operators are not in respect of motor vehicle and the same could be regarded transportation of passenger services. Section 17(5)(a) of the CGST Act restricts the input tax credit in respect of motor vehicle except used for further supply of such vehicle, transportation of passenger, training or transportation of goods. passenger cars), with certain exceptions, e.g. i) for making the following taxable supplies, namely:— (a) further supply of such motor vehicles or conveyances ; or Scroll down to the "Cars and Other Things You Own" section and click "Show More" to expand the list. "Maxicab" means any motor vehicle constructed or adapted to carry more  than six  passengers, but not more than twelve passengers, excluding the driver, for hire or reward. Notional input tax credits have been eliminated for used tangible personal property acquired by way of sale, except for supplies of usual coverings and containers (including returnable containers), seizures and repossessions of property by creditors, and property acquired by insurers on settlement of claims. When you prepare your tax business' tax return for the Canada Revenue Agency (CRA), ITCs are the vehicle for recovering the GST/HST paid out on purchases and expenses related to your commercial activities. For the purpose of covering the cost of fuel, the distance travelled needs to be brought into play, but only if it crosses a certain threshold. You can claim a credit for any GST included in the price of any goods and services you buy for your business. Here, the admissibility of credit on motor vehicles has emerged as the burning issue and still in infant stage §ng there is diversity in the provision of the law and the decision being given by Authority for Advance Rulings. If you use a motor vehicle solely in carrying on your business and you're registered for GST, you’re generally entitled to claim a credit for the GST included in the price of the vehicle, provided you have a tax invoice. With due respect, the author of this article differs with the decision passed by the Authority for Advance Rulings in the above-mentioned case. However, post-amendment, input tax credit shall not be available in respect of supply of the service of renting or hiring of motor vehicles in terms of section 17(5)(b)(i) of the GST Act, unless the inward and the outward supplies are of the same category, standalone or as an element of a taxable composite or mixed supply. construing these words in Section 3(14) of the Indian Railways Act, 1890 has held that they are very wide. Here, the admissibility of credit on motor vehicles has emerged as the burning issue and still in infant stage §ng there is diversity in the provision of the law and the decision being given by Authority for Advance Rulings. This Court in S. S. Light Railway Co. Ltd. v. Upper Doab Sugar Mills Ltd. And Anr. Section 20 (8) of the Value Added Tax Act, 1991 allows the Vendor to claim an amount as input deduction on the purchase of this item as follows: Purchase price – R100 X 14/114 = R12.28. Provident Fund Registration & Employee State Insurance Registration, FDI Filings with Reserve Bank of India (RBI), Project Reports & CMA Data for Bank loans, Registered Valuer under the Companies Act. 2 Purchase of second hand goods from non vendor claim notional input tax. Non-vendor 2. It is worthwhile to note that the term "supply" has its significance and from reading the meaning of supply as given to it in section 7 of the CGST Act, 2017, it is very widely interpreted to include all sorts of supply, service or sale including renting, leasing, etc. Get the latest articles on all things data delivered straight to your inbox. 1. VAT charged to customers is called “output tax”, while the VAT incurred on vehicle purchases and other business expenses that are incurred wholly or partly for purposes of making taxable supplies is known as “input tax”. It is essential to refer definition of cab as defined under the Motor Vehicle Act, 1988 as GST Act has defined the same -. The reality today is that the imposition of the notional input tax credits scheme on every private- As per section 17 (5) input tax credit shall not be available in respect of the motor vehicles and other conveyances, however, following are the exceptional to the same – (a) motor vehicles and other conveyances except when they are used–– (i) for making the following taxable supplies, namely:— However, section 17 (5) state that input tax credit in respect of motor vehicle is not available. Further, input tax means tax paid on goods or services. motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services— Therefore, the consequential question arise about input tax credit in respect of taxes paid on repair, insurance, tyres etc. A motor dealer may not claim a notional input tax deduction unless he has obtained and kept the following: • A declaration by the person selling or trading-in the motor vehicle stating whether the supply is a taxable It ruled out credit of input tax paid on the purchase of motor vehicles used for supply of rent-a-cab service if the transaction was effected before 1-2-2019, It further stated that the amended provisions of section 17(5)(b)(iii) of the GST Act do not contain reference to the rent-a-cab service. However, input tax credits claimable on a car specifically fitted out for transporting disabled people seated in a wheelchair are not be subject to the luxury car limit. 14 Reasons Why your GST registration may be suspended, GST Registration to be cancelled for Mismatch in Sales Return, Departmental GST Audit Process - Key Highlights, TDS on Payments to Residents & Non-Residents. Other Articles by - Apex Court incase of Union of India vs. Vijay Chand Jain (AIR 1977 SC 1302), held that term in respect of has wide connotation: The words "in respect of" admit of a wide connotation; Lord Geene Ml, in Canard's Trustees v. Inland Revenue Commissioners 174 L.T. Pages 21 This preview shows page 12 - 17 out of 21 pages. TDS Rate Chart: What are the applicable TDS rates for FY 2021-22? If the church purchases a car exceeding the luxury car limit of $57,466, the maximum input tax credit that is claimable will be 1/11th of $57,466 which is equals to $5,224. Also, in case of S. S. Light Railway Co., Ltd vs. Upper Doab Sugar Mills Ltd. We are therefore of opinion that the words "in respect of "used in s. 3(14) means " for the provision of " and not " for the user of ". It was further discussed that "rent-a-cab" is not defined in the GST Act and therefore, the nature of services has to be identified from the invoices and the related facts. ... BAS Reports & Notional Input Tax Credit entitlements. Notional Input Tax Credit (VAT) Opening Balance of Purchase Tax (VAT) Reducing Tax Liability (VAT) Refund of Input Tax (VAT) ... Print LR-RR Number and Motor Vehicle Number You can print the LR-RR number and the vehicle number in the invoice, especially when movement of goods is involved. Yet, this needs to be tested in the court of law on availability of credit. What is a connected person? You are not eligible for any input tax credit relating to your personal vehicle if your auto log shows your business use to be 10% or less. As per the negative list of Input Tax Credit, i t has been provided that the ITC on following items cannot be availed:. This is called a GST credit (or an input tax credit – a credit for the tax included in the price of your business inputs). Professional Course, India's largest network for finance professionals, Eligibility of input tax credit with respect to Motor Vehicle. 3.4 Input Tax Credit on a Creditable Acquisition does not obtain Recognition under the Income Tax Rules An input tax credit obtained on a creditable acquisition is not allowed as a deduction: s 27-5. Further, section 17(5)(a) of the Act provides that input tax credit shall not be available on inward supply of motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely -, 1. a further supply of such motor vehicles; or. The notional input tax credit mechanism was intended to remove the tax that was originally paid on the goods and not recovered. Follow the links below for more information about: When you can claim a GST credit It was further submitted that as people take the car on rent for the transportation of, passengers, therefore, the services though claimed as "rent-a-cab" services but it is closely and essentially associated with transportation of passengers and hence, on reading of the provision as cited above the credit of tax paid on the purchase of motor vehicles is admissible to it, While discussing the matter, it was stated by the Authority for Advance Rulings that the GST Act has been amended with effect from 1-2- 2019 and before amendment the provisions of section 17(5)(b)(iii) of the Act did not allow credit of GST paid on inputs for supply of rent-a-cab service, except under certain specific conditions that are not applicable in the this case. Input Tax Credit shall not be available in respect of supply of following : Exception(s) 17(5)(a) Motor Vehicles for Transportation of persons. A Complete Guide to Filing your CA Foundation Registration Form, You can also submit your article by sending to article@caclubindia.com, GST certification How to Calculate Common Credit (ITC) under GST? GST (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be Unavailable in respect of the following, namely: [(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely, 1. further supply of such motor vehicles; or, 3. imparting training on driving such motor vehicles, (aa) vessels and aircraft, except when they are used -, 1. for making the following taxable supplies, namely, further supply of such vessels or aircraft; or, imparting training on navigating such vessels; or. Let's deliberate on the provisions relating to motor vehicle. Therefore, it would be arguable that it is leasing service and not motor vehicle services and hence credit should be eligible. 1  Interestingly, vehicle having capacity more than 12 passengers is not covered under motor cab nor maxi cab. ... CRM, Workshop, Vehicles, Stock Control, eCommerce and much more. Supply < MV 3. An input tax deduction is denied in respect of the acquisition of any "motor car" except where the acquirer is effectively trading in motor vehicles. The provisions related to input credit under GST law are similar to that of old regime. Click the "Check for more tax breaks" button, then select "Skip to see all tax breaks". The author wishes to throw light on the provision mentioned in section 17(5)(a)(A) of the CGST Act, 2017, wherein it was said that the credit of tax paid on motor vehicles is admissible where it is used for further supply of such motor vehicle. In other words, motor vehicle include vehicle having more than four wheels but does not include vehicle used in factory or closed premises. The author can also be reached at nilesh@bsllp.in, Category Nilesh, Section 194LBC | TDS on Income in Respect of Investment in Securitization Trust. Notional input tax credit is available only on such used/second hand vehicles purchased by the VAT dealer when they, in turn, are sold by the dealer to others. It is, therefore, clear from the above discussion that the nature of the service the assessee provides is classifiable under SAC 9966 as renting of a motor vehicle. Used goods, under subsection 120 (3) of the Act, qualify solely for a notional input tax credit under section 176 of the Act. (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged —, in the manufacture of such motor vehicles, vessels or aircraft; or, in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;", The assessee was engaged in supplying cabs on rental basis for the purpose of transportation of passengers. Accordingly, as the phrase 'in respect of' has wide meaning, any input tax paid on repair, insurance etc would fall within gambit of in respect of motor vehicle and accordingly credit would not be available. The relevant provision related to the issue under consideration is as under. Further, if the said services are treated motor vehicle then there was no need to provide rent-a-cab as a separately. 3. imparting training on driving such motor vehicles. By Anton Lockem, Head of, and Prenisha Govender, Candidate Attorney in, the Shepstone & Wylie Tax team Generally, a vendor is not entitled to deduct input tax on the acquisition of a “motor car.” This general rule is however subject to certain exceptions which are contained in the provisos to section 17 (2)(c) of the Value-Added Tax Act 89 of 1991 (“the VAT Act”). The exception is, where a registered taxpayer whose taxable activity is the provision of U-drive and is licensed under the Tourist Board Act, purchases In certain circumstances a VAT vendor may deduct a notional input tax credit in respect of “second-hand goods” acquired from non-vendors where no … Dictionary meaning of phrase 'in respect of' is: as regards; with reference to. It is pertinent to note that section 17(5) of the Act start with 'Notwithstanding anything contained in sub section (1) of section 16  and  sub- section (1) of section 18,  therefore, even if any goods or services used for business purpose but the same is covered under section 17(5) of the Act, then the credit would not be available. A vehicle is, inter alia, a motor car as defined if it is constructed or adapted wholly or mainly for the carriage of passengers. We are here to help. Limited Period Offer Avail 20% discount in all subjects CA,CS and CMA,Coupon- OFFER20 Call: 088803-20003. The Karnataka Authority for Advance Ruling (AAR) in its recent ruling on the application filed by M/s Midcon Polymers Pvt Ltd has adjudged that no deduction towards property taxes is allowed from value of renting of immovable services (RIS). imparting training on flying such aircraft; (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): Provided that the input tax credit in respect of such services shall be available --. The term 'Motor Vehicle' has the same meaning as defined under the Motor Vehicle Act, 1988 "motor vehicle" or "vehicle"  means  any  mechanically propelled vehicle adapted for use upon roads whether the power of  propulsion is  transmitted thereto from an external or internal source and includes  a chassis  to which  a body  has not been attached and a trailer; but  does not include a vehicle running upon fixed rails or a vehicle of  a special type adapted for use only in a factory or in any other enclosed  premises or  a vehicle  having less  than four  wheels fitted  with  engine  capacity  of  not  exceeding  thirty-five cubic centimetres. Run and manage your automative or motor trade accounts online with integrated apps. From the facts, it was further’ inferred that the service receiver has to pay the assessee a certain amount per month as consideration, irrespective of what distance the cab travels in a particular month. Must be 2nd hand - then you can claim notional input - consideration is deemed to be MV if: 1. supplier & recipient are connected persons 2. - notional input VAT - if you meet these 2 requirements: 1. As per provisions of the input tax credit, the input tax credit in respect of Motor Vehicle is not available. It seems to us that in the context of Section 23(1B) 'in respect of' has been used in the sense of being 'connected with'. School The University of Hong Kong; Course Title CL 000000; Uploaded By ktwong2. Now, let us discuss the availability of input tax credit in respect to car taken on lease. Finding it difficult to understand? Considering the above credit would not be available. Rep. 133 calls them colourless words. Now, let discuss availability of credit on GST paid on cab services: As per section 17(5)(b)(iii): Supply of goods or services or both -rent a cab would not be available as credit. Additional amount has to be paid if the cab is retained for extra hours or requisitioned on holidays. 2 wheelers or 3 wheeler are not covered within definition and accordingly if 2 wheelers or 3 wheelers used for the business purpose input tax credit would be available. As the words highlight, it is very clear that the credit of tax paid on motor vehicle is admissible if the same is used in further supply. "Section 17 - Apportionment of credit and blocked credits. Hence, the above decision needs reconsideration in light of the provisions cited above. Thus, where "rent-a-cab" is included in the meaning of the term "supply", and renting of motor vehicles is the further supply of such motor vehicles, hence, the conditions mentioned in section 17 are fulfilled in favour of admissibility of input tax credit to the assessee of tax paid on such motor vehicles. Concept, but the claiming thereof is subject to certain documentary requirements hence, the consequential question about! 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