QUESTION

Whether crane purchased for lifting the goods given /rented to third party for hire charges eligible for ITC in view of amended section-17(5) of the act?

ANSWER

FACTS OF THE CASE:

Eligibility of ITC on purchase of cranes for lifting the goods given /rented to third party for hire charges.

LAW APPLICABLE:

SECTION 17(5) OF CGST ACT restricts ITC as follows:
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, 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 ----------------------------------------------

INTERPRETATION:

GST paid on purchase of crane used for rental purposes for transportation and handling of goods is eligible for ITC on following grounds:
1. Although the registration number is provided by RTA for movement of cranes on roads but that is for the purpose of traffic control and road management.
The crane is classified under Chapter heading 8426 as "Ship's derricks; cranes; including cable cranes; mobile lifting frames , straddle carries and works trucks fitted with a crane". Chapter 84 covers "Nuclear Reactors, Boilers, Machinery and Mechanical Appliances; parts thereof".

On the other hand Custom Tariff covers "Vehicles other than Railway or Tramway Rolling-Stock, and parts and accessories thereof" under Heading 87. For the purpose of GST it is considered a Machine. Therefore restrictions relating to ITC on vehicles should not apply to it.

2. The provision to restrict ITC on passenger vehicles with less than capacity of 13 passengers is framed keeping in mind to disallow ITC on vehicles used for personal purposes by the business owners.

3. There is no restriction on the vehicle other than passenger vehicle. The credit on the vehicles used for movement of goods is not restricted u/s 17(5).

If the crane is assumed as a vehicle, even then the credit of it cannot be disallowed.

CONCLUSION:

ITC of crane used for rental purposes for transportation and handling of goods is eligible. (Reply dt. 25/04/2022)