The Rajasthan Authority for Advance Ruling ( AAR ) has issued a significant ruling on the applicability of Input Tax Credit ( ITC ) claims for Goods Transport Agencies ( GTAs ) on transport vehicles purchased before the new GST mechanism came into effect.
M/s Goru Mali, a registered transport agency under the GST regime, filed an application with the AAR seeking clarification on their eligibility to claim ITC on a transport vehicle purchased before April 1, 2023. Prior to this date, transportation services fell under the Reverse Charge Mechanism (RCM), where the recipient of the service bore the GST liability. However, with the new GST mechanism, GTAs have the option to opt for the Forward Charge Mechanism ( FCM ), making them responsible for paying GST.
The applicant contended that even though the vehicle was purchased under the RCM mechanism, they should be allowed to claim ITC under the new FCM system they had opted for from April 1, 2023 onwards.
The two-member bench of Mahipal Singh and Mahesh Kumar Gowla acknowledged the change in tax mechanism and its impact on ITC claims. However, they noted that the applicant was a registered person under the GST Act, and the transport vehicle was intended for use in the course or furtherance of their business.
The bench observed that “in view of Section 18(d) of CGST Act and corresponding provisions of SGST and IGST Act, 2017, the applicant is allowed to avail ITC of Capital Goods purchased before 31.03.2023 and exclusively used for such exempt supply from 01.04.2023 provided that the credit on Capital Goods is reduced by five percentage points per quarter of a year or part thereof from the date of the invoice or such other documents on which the capital goods were received by the taxable person, subjected to fulfill the condition enumerated in Rule 40 of CGST Act.”
The bench ruled that claim of ITC is available on the vehicle by specifying conditions that the ITC amount will be subject to a reduction of 5% per quarter, or part thereof, calculated from the invoice date of the purchase. This reduction reflects the transition from RCM to FCM.
G.N. Sharma represented the applicant.
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