Subject: Query Regarding Input Tax Credit for Vehicle Purchase

Dear Jinesh,

I would try to answer your query without getting much into the technical language for your ease of understanding.

In reference to your query, please note that ITC on motor vehicles is blocked (not allowed) under GST, however in case the same is used for passenger/guest transportation, the same is allowed on certain terms.

In simple words, you may charge GST @ 12% from your guests on the said service and claim ITC on the cars purchased. You have an option of charging a lower GST of 5%, however in this case no ITC is allowed on the cars purchased.

Hope the above suffices.

Should you require any further details or technical details, please connect in case of any further clarifications.

Thanks & Regards,

CA Aditya Dhanuka.

https://www.linkedin.com/in/aditya-dhanuka-69824451/

Presently under Section 17(5) resctriction is applicable unless 

- you are under same line of business

- goods transportation company

- Passanger transportation company

- More than 13 Seat Vehicle

- Its use for transportation of goods / Staff

In given case its really difficult to justify that car is used for the transportation of guest only since you are not going to charge separately for that service

However through package drafting and invoice management it can be established and you can take 100% credit of the ITC on vehicle, but without documentation and absence of necessary arrangement it can be really litigative

- ITC on car is not allowed as transportation services provided to the hotel guests are incidental to the main services of the hotel which is renting of room/hall 

For detailed discussion you may opt for phone consultation

Dear Jinesh,

Under GST, ITC on motor vehicles is generally restricted but allowed if the vehicles are used for guest transportation (passenger services). Key points:

1. 
   Eligibility: ITC is allowed if vehicles are used exclusively for guest transport.
2. 
   Vehicle Capacity: Restriction applies only to vehicles with ≤13 seats unless used for passenger transportation.
3. 
   GST Rate: Charge GST at 12% to claim ITC. Opting for 5% GST disallows ITC.
4. 
   Documentation: Maintain clear records to prove exclusive business use.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Dear Mr. Mathew,

Thank you for reaching out with your query regarding the eligibility of Input Tax Credit (ITC) under GST for motor vehicles used exclusively for guest transportation.

Under the GST framework, ITC on motor vehicles is governed by Section 17(5) of the CGST Act, 2017, which places certain restrictions and conditions on availing ITC. Below is a clarification on your specific concerns:

1. ITC on Motor Vehicles Used Exclusively for Guest Transportation

ITC on motor vehicles is allowed under the following circumstances:

• 
  Exclusively for business purposes: If the vehicles are used exclusively for guest transportation in your resort (a business purpose), the eligibility for ITC depends on the seating capacity of the vehicles.
• 
  Passenger capacity: ITC is available only if the motor vehicles have a seating capacity of more than 13 persons (including the driver).

Since your resort intends to use these vehicles exclusively for guest transportation, the passenger capacity of the vehicles becomes a critical factor.

2. Conditions for ITC Eligibility

• If the motor vehicles have a seating capacity of 13 or fewer persons, ITC is generally not available unless the vehicle is used for specific purposes such as making taxable supplies like transportation of passengers, goods, or imparting driving skills.
• If the vehicles have a seating capacity of more than 13 persons, ITC can be claimed provided you maintain proper records of usage for business purposes.

3. Supporting Documentation

To claim ITC, you will need:

• Invoices for the purchase of vehicles.
• Proof that the vehicles are used exclusively for guest transportation (e.g., records of bookings and vehicle usage logs).
• ITC ledger maintained in your GST returns.