In a recent order, the Madras High Court temporarily stopped the government from enforcing a Rs. 3,000 crore tax demand on car leasing companies. The Directorate General of GST Intelligence ( DGGI ) issued notices claiming the companies wrongly classified their services under Goods and Services Tax rules.
The Directorate General of GST Intelligence ( DGGI ) stated the companies claimed their services as “leasing services” which are taxed at 28% under GST instead of “credit-granting services” which are not taxed under GST. Because of this, the government denied the company’s Input Tax Credit ( ITC ) on motor vehicles.
Complete Draft Replies of GST ITC Related Notices, Click Here
The companies argued in court that their leasing of motor vehicles is a legitimate service under GST and does not fall under blocked credit rules which restrict ITC claims in some cases. They also said the notices issued by the Directorate General of GST Intelligence ( DGGI ) were outside its jurisdiction.
Justice Mohammed Shaffiq granted a temporary stay on the tax notices until the case is fully heard. This stay means the companies won’t face immediate financial penalties and can continue their business operations. The court has also asked the tax authorities to respond to the companies’ claims.
This case raises important questions about how Goods and Services Tax ( GST ) rules should be applied regarding the classification of services and the restrictions on claiming ITC. The companies believe their services are taxable but the denial of ITC is unfair when GST is properly paid.
Complete Draft Replies of GST ITC Related Notices, Click Here
If the final ruling favors the companies, it could set an example for similar cases and help clarify GST rules for leasing and financial services.
For businesses, the case shows how complicated GST rules can be and the challenges of staying compliant. The court’s final decision is expected to provide much needed clarity for both companies and tax officials potentially helping how GST rules are applied in the future.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
