ITC on passenger vehicles shall be available when those are leased to vendors on rent : AAR, Madhya Pradesh :

(Narsimha Transport)

The Applicant is providing ‘Goods Transport Agency Services’ and is paying tax @12%. The Applicant has purchased passenger vehicles and leased those to companies. The applicant has sought an advance ruling on whether GST paid on the purchase of those passenger vehicles which are provided to customers on lease basis will be available as an input tax credit as per the CGST Act, 2017?

The Authority for Advance Rulings, Madhya Pradesh observed that the Applicant has purchased such passenger vehicles for the furtherance of its business, i.e., for providing to other entities on monthly lease rent basis. As per the CGST Act, 2017 ITC in respect of motor vehicles, except in certain circumstances, the ITC is not available. However, in case of ‘further supply of such vehicle or conveyances’ ITC shall be available. *The term ‘further supply’ has not been defined in the Act, therefore, one needs to go by the definition of ‘supply’. Also, the term ‘further’ pre-fixed to ‘supply’ is merely in the form of adverb and does not differentiate it from ‘Supply’.*

The passenger vehicles given on rent by the registered applicant are in the nature of ‘taxable supplies’ according to the CGST Act, 2017 as are supplied passenger vehicles on a monthly consideration in the course of business in taxable territory and such supplies are taxable in nature.

Therefore, *the Applicant is entitled to avail if ITC on passenger vehicles which are further leased to customers on rent.*