Phoenix Tax Consultant™ March 3, 2022Quick answer: Under Section 17(5)(a) of the CGST Act, 2017, ITC on a motor vehicle used to carry persons with a seating capacity of up to 13 (including the driver) is blocked. It is allowed only when the vehicle is used for further supply of such vehicles (dealers), for transporting passengers (taxi, travel operators) or for driving training. ITC on goods carriages (trucks, tempos) and on vehicles with more than 13 seats is generally available. The same rule applies to insurance, repair and servicing of those vehicles.
The law in one table
| Vehicle / service | ITC allowed? | Provision |
|---|---|---|
| Car / SUV / jeep (up to 13 seats) for office or director use | No – blocked | Section 17(5)(a) |
| Same vehicle bought by a car dealer for sale | Yes | Exception (A) – further supply |
| Same vehicle used by a taxi / cab / travel operator | Yes | Exception (B) – transportation of passengers |
| Same vehicle used by a driving school | Yes | Exception (C) – imparting training on driving |
| Bus / van with more than 13 seats (staff bus, school bus) | Yes, if used for business | Outside Section 17(5)(a) |
| Truck, tempo, goods carriage | Yes, if used for business | Outside Section 17(5)(a) |
| Insurance, servicing, repair of a blocked vehicle | No (except dealers, taxi operators, driving schools, manufacturers and insurers of such vehicles) | Section 17(5)(ab) |
| Renting / leasing / hiring of a blocked vehicle | No, unless used for the same exceptions | Section 17(5)(b)(i) |
| Insurance and repair of trucks / goods vehicles | Yes | Not blocked |
Why the seating capacity matters
Before 1 February 2019, the block applied to all “motor vehicles and other conveyances”. The CGST (Amendment) Act, 2018 narrowed it to vehicles for transporting persons with an approved seating capacity of not more than 13, including the driver. The seating capacity is the one approved in the vehicle’s registration certificate (RC), not the number of people who actually travel.
Common business situations
- Company car for the MD: ITC on purchase, insurance and service is blocked, even if the car is used only for business visits.
- Staff transport bus (above 13 seats): ITC is available on purchase and maintenance.
- Delivery van or truck: ITC is available because it carries goods, not persons.
- Car dealer’s demo vehicle: CBIC Circular No. 231/25/2024-GST clarifies that ITC on demo vehicles used by authorised dealers for test drives and demonstrations is not blocked under Section 17(5)(a).
- Cab hired for employees: the rent-a-cab service is blocked under Section 17(5)(b), unless it is obligatory for the employer to provide it under a law in force.
Two more rules to remember
- Depreciation on GST: under Section 16(3), if you claim depreciation on the GST component of the vehicle under the Income-tax Act, ITC on that tax is not allowed.
- Selling a vehicle on which ITC was taken: under Section 18(6), pay the higher of (a) ITC taken reduced by 5% for every quarter of use, or (b) tax on the transaction value.
Documents to keep
- Tax invoice in the business name with GSTIN
- Vehicle RC showing seating capacity and the registered owner
- Permit / licence for taxi, tourist or driving-school use (where ITC is claimed under an exception)
- Insurance policy and service invoices
- Fixed asset register showing whether depreciation was claimed on GST
10 frequently asked questions
1. Can I claim ITC on a car purchased for business?
No, if it is a passenger vehicle with up to 13 seats. Section 17(5)(a) blocks it unless you deal in cars, run a passenger transport business or a driving school.
2. Is ITC available on a truck or goods vehicle?
Yes. Goods carriages are not covered by Section 17(5)(a), so ITC is available when they are used for business.
3. What about a vehicle with more than 13 seats?
ITC is allowed, because the block applies only to vehicles with approved seating capacity of 13 or less, including the driver.
4. Can I claim ITC on car insurance and servicing?
Not for a blocked car. Section 17(5)(ab) blocks insurance, servicing, repair and maintenance of such vehicles, except for dealers, passenger transporters, driving schools, manufacturers and insurers.
5. Is ITC available on car repair for a taxi operator?
Yes. Because the vehicle is used for transportation of passengers, both the vehicle and its repair are eligible.
6. Can a car dealer claim ITC on demo cars?
Yes. CBIC Circular No. 231/25/2024-GST clarifies that demo vehicles used by authorised dealers are not blocked under Section 17(5)(a).
7. Is ITC allowed on rent-a-cab for employees?
Generally no. It is blocked under Section 17(5)(b), unless the employer is obliged by law to provide the service.
8. If I claim depreciation on GST, can I still take ITC?
No. Section 16(3) does not allow ITC on the tax component on which depreciation is claimed.
9. What happens to ITC when I sell a vehicle?
Under Section 18(6), pay the higher of ITC taken minus 5% per quarter of use, or GST on the sale value.
10. Can Phoenix Tax Consultant™ check our ITC claims?
Yes. Our team in West Tambaram, Chennai reviews vehicle and other blocked credits, reverses wrong ITC and replies to GST notices. Call 9940349819 or 8807258797.
தமிழில்: வாகனங்களுக்கு GST ITC கிடைக்குமா?
சுருக்கமான பதில்: CGST சட்டம் Section 17(5)(a)-ன் கீழ், ஓட்டுநர் உட்பட 13 பேர் வரை இருக்கை கொண்ட பயணிகள் வாகனத்துக்கு ITC கிடையாது. வாகன விற்பனையாளர்கள், பயணிகள் போக்குவரத்து (taxi / travels), ஓட்டுநர் பயிற்சிப் பள்ளிகள் – இவர்களுக்கு மட்டும் விதிவிலக்கு. சரக்கு வாகனங்கள் (truck, tempo), 13-க்கு மேல் இருக்கை கொண்ட வாகனங்களுக்கு ITC பொதுவாகக் கிடைக்கும். இதே விதி insurance, repair, servicing-க்கும் பொருந்தும்.
சுருக்க அட்டவணை
- அலுவலக கார் (13 இருக்கை வரை): ITC இல்லை.
- Car dealer விற்பனைக்கு வாங்கும் கார்: ITC உண்டு.
- Taxi / travels நிறுவனம்: ITC உண்டு.
- Driving school: ITC உண்டு.
- 13-க்கு மேல் இருக்கை கொண்ட bus / van: வணிகப் பயன்பாட்டுக்கு ITC உண்டு.
- Truck / சரக்கு வாகனம்: ITC உண்டு.
- தடை செய்யப்பட்ட காருக்கு insurance / service: ITC இல்லை (Section 17(5)(ab)).
- ஊழியர்களுக்கு rent-a-cab: பொதுவாக ITC இல்லை (Section 17(5)(b)); சட்டப்படி கட்டாயமானால் மட்டும் உண்டு.
முக்கிய விதிகள்
- இருக்கை எண்ணிக்கை RC-ல் அங்கீகரிக்கப்பட்டதையே கணக்கில் எடுக்க வேண்டும்.
- Dealer-களின் demo வாகனங்களுக்கு ITC தடை இல்லை என CBIC Circular 231/25/2024-GST தெளிவுபடுத்தியுள்ளது.
- GST தொகைக்கு depreciation எடுத்தால் அந்த ITC கிடைக்காது (Section 16(3)).
- ITC எடுத்த வாகனத்தை விற்றால், ஒவ்வொரு காலாண்டுக்கும் 5% குறைத்த ITC அல்லது விற்பனை மதிப்பின் மீதான GST – எது அதிகமோ அதைச் செலுத்த வேண்டும் (Section 18(6)).
வைத்திருக்க வேண்டிய ஆவணங்கள்
- GSTIN உடன் வணிகப் பெயரில் tax invoice
- இருக்கை எண்ணிக்கை காட்டும் RC
- Taxi / tourist / driving school permit (விதிவிலக்கு கோரினால்)
- Insurance policy, service invoices
- Fixed asset register
அடிக்கடி கேட்கப்படும் கேள்விகள்
1. வணிகத்துக்கு வாங்கிய காருக்கு ITC உண்டா? – 13 இருக்கை வரையிலான பயணிகள் வாகனம் என்றால் இல்லை.
2. Truck-க்கு ITC உண்டா? – ஆம், சரக்கு வாகனங்களுக்கு தடை இல்லை.
3. 13-க்கு மேல் இருக்கை என்றால்? – ITC கிடைக்கும்.
4. Car insurance, service-க்கு? – தடை செய்யப்பட்ட காருக்கு இல்லை.
5. Taxi operator-க்கு repair ITC? – ஆம், கிடைக்கும்.
6. Dealer demo car-க்கு? – ஆம், Circular 231/25/2024-GST படி.
7. ஊழியர் rent-a-cab-க்கு? – பொதுவாக இல்லை; சட்டப்படி கட்டாயமானால் உண்டு.
8. GST-க்கு depreciation எடுத்தால்? – ITC கிடைக்காது.
9. வாகனத்தை விற்றால்? – Section 18(6) படி செலுத்த வேண்டும்.
10. Phoenix Tax Consultant™ உதவுமா? – ஆம். West Tambaram, Chennai-ல் ITC review, தவறான ITC reversal, GST notice reply செய்கிறோம். அழைக்க: 9940349819, 8807258797.
Unsure about vehicle ITC? | வாகன ITC பற்றி சந்தேகமா?
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