QUESTION

My client has purchased Car and Truck in his personal name and given both items on monthly rent to his company and on rental value, client paying GST @18% and availed ITC of GST paid on purchased of Car and Truck including its insurance policies and repair etc. in other words, client paying GST from ITC which were paid at the time of purchase and expenses relating to car and truck ,  like insurance and repair. We want to know what is the GST rate of car and Truck supplied on rent to company ? Second our availment of ITC is availed looking into the block credit of Section 17(5) (v) ? Whether registered person can avail ITC credit on GST paid on purchase of motor vehicle and its expenses. if he is supplying goods on Rent ?

ANSWER

Facts of the case: Cars and trucks were purchased and GST was paid. The same were supplied on rent to related party. To check availability of ITC on purchase of motor car (and insurance, repair etc.) and to determine the rate of tax on renting of motor car.

Law Applicable: SECTION 17(5) OF CGST ACT
Input tax credit shall not be available 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:-
        (A) further supply of such motor vehicles; or
        (B) transportation of passengers; or
        (C) imparting training on driving such motor vehicles;

    (aa) vessels and aircraft except when they are used''
            (i) for making the following taxable supplies, namely:-
                    (A) further supply of such vessels or aircraft; or
                    (B) transportation of passengers; or
                    (C) imparting training on navigating such vessels; or
                    (D) imparting training on flying such aircraft;
            (ii) for transportation of goods;
   
(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-
              (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-
                    (I) in the manufacture of such motor vehicles, vessels or aircraft; or
                    (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;


     (b) the following supply of goods or services or both-
             (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Section 6 of GST tariff produces as follows;
i. Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient.  5% or 12% (depending on conditions to be followed).
ii. Time charter of vessels for transport of goods.              5%
iii. Rental services of transport vehicles with or without operators, other than (i) and (ii) above.    18%

Interpretation: As Section 17(5) does not restricts ITC on Motor vehicles used for transportation of goods, thus ITC is not blocked on truck used for transportation of goods. Thus ITC on other expenses like repair insurance etc of truck is also allowed.
However in case of Car given on rent ITC is not allowed as the same is blocked under section 17(5). The same decision is also given by West Bengal Authority of Advance Ruling in case of Ashis Ghosh. The same is enclosed for your reference

The 4- digit SAC code for service of renting motor vehicle is 9966 and the rate of tax, as per above given extract of traiff, is 18%.

Conclusion: ITC on purchase, repair and insuring the truck shall be available however it shall not be available for car given on rent. Tax rate of renting the vehicle is 18%.