Input tax credit should be allowed for motor car to all when used in furtherance of business and in “supply”, including services on which GST is levied
By: – DEVKUMAR KOTHARI
Goods and Services Tax – GST
Dated:- 28-12-2018
Links of some of related provisions:
THE CENTRAL GOODS AND SERVICES TAX ACT, 2017:
Links for some important definitions / meanings for the purpose of study:
Meaning of business S. 2.17
Meaning of Capital goods – 2.19,
Meaning of Conveyance -2.34
Meaning of motor vehicle 2.76
Meaning of input tax – s.2.62
Meaning of input tax credit S. 2.63
Meaning of Supplier S. 2.105
Meaning of taxable supply S. 2.108
Value of taxable supply S. 15
Apportionment of credit and blocked credits S. 17
Availability of credit in special circumstances S. 18
Corresponding provisions in other related enactment may be referred to.
Higher GST on motor car is based on intelligible differential:
There is no doubt that higher rate of GST in comparison to other
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life is determined.
Ideally in case of extensive use a car need to be replaced between 2-3 years and in case of lesser use it may be between 4-5 years. In case of self-driven cars with lesser use also ideally a car need replacement within 6-7 years.
At the time of replacement the old car fetches about 15-20 % of cost of old car and new car of same model is priced about 15-20% higher of original cost. Therefore, there is consumption of capital cost of old car to the extent of 80-85%.
In case of accidents met by car, its life can come to end at any time , therefore, life is also uncertain.
Therefore, one can also take a view that car is a consumable assets which is consumed within a short period
Car is used in furtherance of business or profession:
Car is used in furtherance of business and profession. Depending on status of businessman and professional man suitable car is required for business and professional purposes. If the car is used in “supply” ( of goods and/ or service) o
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usages of car, therefore there is no reason for not allowing ITC in respect of car purchased by paying GST and used in furtherance of business or commerce.
Legal provisions:
Readers are requested to refer to latest provisions and provisions as applicable at any relevant times. Such provisions are available on this website and can be easily searched. Therefore, links for all provisions are not added. Few links are added for convenience and illustration for undertaking study with related provisions.
Request to honorable Prime Minister and Finance Minister:
Author request to them and also to the members of GST council to realize ground realities, and come above bias and presumptions and try to understand role of cars in business and profession and consider importance and allow ITC on all supply of goods and services and capital goods which are used in supply of taxable goods and services.
Ground reality is that sale promotion is primary activity, unless reasonable sales projections a
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s used for offical purpose only
(2). Even if ITC is not available the entire cost of the capital asset is capitalised and allowed as depreciation for the professioanls (which is inclusive of any GST paid on them) and as such there is no loss on account of denial of such ITC to the professioanls as claimed.
(3). The fees or service charges levied by the professioanls on thier clients are not in any way related to the extent of usage of motor vehicles as it is detremined by the time and effort in rendering such services. Unlike other businesses, services by professionals are not cost based but skill based and market related. The moot question is how and by what mechanism the ITC or part of it is going to be passed on their clients
I sincerely feel that the demand is not justified
J.KUMAR
Advocate
Dated: 29-12-2018
Reply By Ganeshan Kalyani as =
In today's time every body is too busy in their work. A businessman, salaried person, daily worker etc. all are busy. Nobody has tim
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