ITC Is Eligible on Repairs, Refurbishment, and Other Business Expenses for Dealer in Second-Hand Goods | AAR (Kerala)

Case Details: Royaldrive Pre Owned Cars LLP - [2024] 166 taxmann.com 46 (AAR–KERALA)

Judiciary and Counsel Details

• • Smt. Gayathri P. G. & Abdul Latheef. K, Member
  • CA Jamsheed Adam, FCA for the Appellant.

Facts of the Case

The applicant, Royaldrive Pre Owned Cars LLP, is engaged in the business of buying and selling second-hand goods, specifically in old used luxury cars. The applicant sought an advance ruling on whether Input Tax Credit (ITC) would be available on inward supplies of goods or services used in their business, such as repairs, refurbishment costs, and other operational expenses, excluding the purchase of old or used motor vehicles, given the restrictions under Sections 16 and 17 of the Central Goods and Services Tax Act, 2017, and the corresponding rules.

AAR Held

The AAR noted that neither Section 16 nor Section 17, nor Notification No. 08/2018- Central Tax (Rate), dated 25-01-2018, which provides applicable tax rate on second hand goods, restricts the eligibility of ITC on direct and indirect expenses incurred in the business of selling second-hand luxury cars.

Therefore, the AAR held that ITC is eligible on tax paid for various business expenses, including repairs, refurbishment of vehicles, purchase of spares, office stationery, telephone, rent, advertisement, and professional charges.