ITC is Not Available on Purchase of Motor Vehicles Used in Research for Automobile Benchmarking Services | AAR

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  • Last Updated on 17 April, 2025

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ITC on Motor Vehicles

Case Details: A2Mac1 India (P.) Ltd., In re - [2025] 173 taxmann.com 153 (AAR-TAMILNADU)

Judiciary and Counsel Details

  • Balakrishna S & Smt. A. Valli, Member

Facts of the Case

The applicant, engaged in providing automobile benchmarking services through an online data management platform, filed an application before the Tamil Nadu Authority for Advance Ruling. To deliver 360-degree vehicle insights on parameters such as technology, cost, performance, sustainability, and supply chain, the applicant procured motor vehicles (primarily cars) from the domestic market, disassembled them, and incorporated the research into a knowledge database for its customers. Upon completion of a defined retention period, the vehicles were sold upon payment of GST. The applicant claimed entitlement to input tax credit (ITC) on such purchases, asserting that the vehicles were used for providing taxable outward supplies and were eventually supplied, thereby falling under the exception in Section 17(5)(a) of the CGST Act.

AAR Held

The Hon’ble Tamil Nadu Authority for Advance Ruling held that the applicant was not eligible for ITC under Section 17(5)(a) of the CGST/Tamil Nadu GST Act. It was observed that the vehicles, after disassembly, were not supplied as ‘used or old motor vehicles’ but were sold as ‘scrap of automobile parts’ with GST paid at 18%. Since the outward supply was classified as scrap, it did not constitute ‘further supply of such motor vehicles’ as required under the exception clause. Consequently, the applicant’s activity did not fall within any of the exceptions to the ITC restriction, and ITC on motor vehicles used for research and subsequently sold as scrap was held to be inadmissible.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied