Issues and Concerns
(i) Sub-Sections (c) and (d) of Section 17(5) restricts input tax credit when received towards construction of immovable property. The term ‘construction’ used in Section 17 has been explained to includes re-construction, renovation, additions or alterations or repairs to an immovable property only to the extent it has been capitalised in the books of accounts. Would this mean that any renovation, additions or alterations or repairs to an immovable property which is not capitalised would still be an eligible input tax credit as long as it fulfils the conditions in Section 16 of the Act. For example, a service provider replaces broken windows in his office, the cost of which has not been capitalised in its books of accounts, instead the entire amount has been charged to the profit and loss account along with taxes. Would the company still be eligible to avail input tax credit since there is no restriction on availing the said tax credits either under Section 17(5) or under Section 16(3).
(ii) Now the question arises as to whether input tax credit incurred on special purpose motor vehicles such as cranes, drilling and excavation vehicles such as bore well drilling lorries and bulldozers which cannot be claimed to be used in transportation of goods. Section 17(5) restricts input tax credit on Motor vehicles and other conveyances unless the same has been used in the transportation of goods or for effecting taxable supplies such as further supply of the motor vehicle, transportation of passengers or imparting training for driving such vehicles. The GST Act borrows the definition of a motor vehicle from section 2(28) of the Motor Vehicles Act, 1988 which is defined as “any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty-five cubic centimeters;” In view of the above definition, a crane, borewell or a bulldozer can be said to be a motor vehicle. In the past cenvat regime where similar restriction existed, the credit was allowed. This aspect may be tested in time to come.