Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

ITC on car insurance premium

07 May 2018

i have a car on my business name which is sole proprietorship ( manufacturing business)and can i avail input tax credit on gst paid on the insurance premium of the car

Reply
Follow
Share

15 Replies

Nageswara Rao Kasthuri (Asst. Manager - Accounts and Taxation) (73 Points)
Replied 07 May 2018

read section 17 (5)

Upgrade to CAclubindia Pro. Subscribe Now!

Vikas Mahajan (157 Points)
Replied 07 May 2018

but that section only describe the itc on purchase of vehicles and conveyance but not describe the services which we availed in subsequent years like insurance premium.

Nageswara Rao Kasthuri (Asst. Manager - Accounts and Taxation) (73 Points)
Replied 07 May 2018

section 17 (5) (b) (iii)

Vikas Mahajan (157 Points)
Replied 07 May 2018

this section also specifies health insurance and life insurance (not general insurance)

Nageswara Rao Kasthuri (Asst. Manager - Accounts and Taxation) (73 Points)
Replied 07 May 2018

I think now you got clarification, hence, you can take ITC.

Upgrade to CAclubindia Pro. Subscribe Now!

Vikas Mahajan (157 Points)
Replied 07 May 2018

ok thanks

1 Like

CA Sunil (Internal Auditor) (204 Points)
Replied 07 May 2018

Clause (a) to section 17 (5 ) , declares motor vehicles and other conveyances as blocked credit, subject to certain exceptions. Accordingly no ITC is available in respect of motor vehicles

If you are into the business of renting / leasing car/ Conveyence / Training ----> Yes can claim ITC input credit on both car and Insurance premium.

However if you are in some other business, where the car is used for furtherance of business ----> you cannot claim ITC on Car only, but ITC on insurance & other accessories is not blocked.

Therefore there is no restriction on ITC towrds Insurance paid .so you can claim ITC on insurance premium..

5 Like

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 07 May 2018

Section 17(5) states that ITC is not available specifically for motor vehicles ( other than for sale further ( lease could be covered here?) , transportation of passenger ( rent a cab, stage carrier, contract carrier etc), imparting training.

Insurance, repair, spares purchase are not specifically barred and therefore available due to reason that if ITC in relation to MV is would be barred- However in 17 (5) it is in respect of which is legally read as only or narrow meaning. ITC available.

8 Like

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 07 May 2018

Agree with CA Sunil
the phrase "shall not be , In Respect of "
means in regard to

1 Like

CA Sunil (Internal Auditor) (204 Points)
Replied 07 May 2018

Thank you Madhu Sir...

Upgrade to CAclubindia Pro. Subscribe Now!

Pralay Chakraborty (Service) (440 Points)
Replied 07 May 2018

Sec 17(5) specifies "input tax credit shall not be available in respect of.." the phrase "in respect of" covers wide range. So department may disallow expenditures in respect to motor vehicle likes of insurance etc.

I will tell you more confusing item, forget about insurance whether credit for fire extinguisher kept in motor vehicle can be taken?

Nageswara Rao Kasthuri (Asst. Manager - Accounts and Taxation) (73 Points)
Replied 07 May 2018

dear sir section is specifically defines life & health insurance only , general insurance is eligible for ITC.

CA Sunil (Internal Auditor) (204 Points)
Replied 08 May 2018

With the limited information available currently, we should not stretch our imagination.The word "in respect of" car means only car. There is a difference between "in relation to " and " in respect to".

"In relation to " covers all related items. If the law makers objective was to deny ITC on Car Insurance premium, they would made it like "in respect of all", which they did not, hence no point in stretching the meaning and inference of plain english.

Cheers

1 Like