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

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.

List of Cases Reviewed

• A.M. Motors., In re [2018] 98 taxmann.com 157/70 GST 484/18 GSTL 93 (AAR – KERALA)(para 18)
• Chowgule Industries (P.) Ltd., In re [2020] 113 taxmann.com 365/33 GSTL 288/78 GST 318 (AAR – MAHARASHTRA)(para 19) distinguished