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Availability of ITC of expenses in respect of Motor vehicle

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. 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.
 
Let’s deliberate on the provisions relating to the motor vehicle. 
 
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.
 
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
 
 In other words, motor vehicle include vehicle having more than four wheels but does not include vehicle used in factory or closed premises. 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.
 
Therefore, the consequential question arise about input tax credit in respect of taxes paid on repair, insurance, tyres etc
 
As per provisions of the input tax credit, the input tax credit in respect of Motor Vehicle is not available.
 
Dictionary meaning of phrase ‘in respect of’ is : as regards; with reference to.
 
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. Rep. 133 calls them colourless words. This Court in S. S. Light Railway Co. Ltd. v. Upper Doab Sugar Mills Ltd. And Anr. construing these words in Section 3(14) of the Indian Railways Act, 1890 has held that they are very wide. 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’,
 
Also, incase 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       “.
 
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.
 

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