ITC is the backbone of indirect tax laws, and to streamline the flow of credit the Government of India in 2017 has consolidated all erstwhile indirect tax laws into one law i.e. Goods and Services Tax (GST).
In GST law, the registered person is entitled to take input tax credit of any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.
Legal provision:
To claim ITC the registered person must fulfill all the conditions of section 16(2) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”, which enlist conditions, thereafter only such registered person will be entitled to ITC.
The conditions are as follows:
- Registered person has possession of a tax invoice or debit note issued by a supplier
- The details of the invoice or debit note have been communicated to the recipient of such invoice or debit note in the manner specified under section 37 (GSTR-1)
- Registered person has received the goods or services
- Input tax credit is reflected in GSTR-2B of the registered person
- Tax charged in respect of such supply has been actually paid to the Government
- Registered person has furnished the return under section 39 (GSTR-3B)
However, there are some specific goods and services on which registered person is not entitled to claim ITC, those goods and services are enlisted in section 17(5) of the CGST Act, 2017, one such good is motor vehicle.
But before moving further, it is imperative to understand the legal provision which restricts ITC on motor vehicle.
For our discussion clause (a) of Section 17(5) of CGST Act is relevant, which provides that input tax credit shall not be available in respect of motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons(including the driver), except when they are used for making following taxable supplies, namely:
A. further supply of such motor vehicles which covers traders of motor vehicles
B. transportation of passengers which covers travel operator offering transportation services
C. imparting training on driving such motor vehicles which covers motor driving schools
The bare provision of law read 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;
It is important to note that section 17(5) restricts registered person from claiming credit, unless the good and services are used in carved out activities.
Meaning thereby, even though the motor vehicle is used in course or furtherance of business the registered person will not be able to claim ITC if it not used for any of the enlisted activity.
However, the above-mentioned provision does not bar ITC on motor vehicles used for transportation of goods such as trucks, tempo etc.
In other words, if the motor vehicle is used for transportation of person, ITC will not be available however if the motor vehicle is used for transportation of anything other than persons, ITC will be available. Since the restriction is only on “motor vehicle for transportation of persons”.
At this juncture it is important to understand the meaning of motor vehicle in GST law. As per Section 2(76) of the CGST Act, “motor vehicle” shall have the same meaning as assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988;
Now, let us see Motor Vehicles Act, for the definition, section 2(28) defines “motor vehicle” or “vehicle” means 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 exceeding1[twenty-five cubic centimetres];
Discussion:
Since we have understood the provision of GST law for eligibility of ITC on motor vehicle, let us see whether ITC on lifestyle pickup trucks will be available?
In India, there are 2 segments of pickup trucks one covers vehicles like Mahindra Bolero pickup, Tata Ace etc. which are 2 seater, small cabin and requires a commercial number plate to drive and also requires all India permit as per the Motor Vehicles Act. Whereas on the other hand, the luxury segment covers vehicle like Isuzu V-Cross D Max and Toyota Hilux, or in future Tesla Cyber Truck which are loosely called lifestyle vehicle due to their five-seater capacity, air conditioned cabin and huge cargo space. Majorly Indians use this kind of vehicle for off-roading and for adventure travelling due to its heavy-duty engine,4-wheel drive capability, cruise control and comfortable seating.
Now, let us discuss eligibility of ITC on luxury segment pickup trucks, mainly there are 2 school of thoughts, one which rejects ITC on luxury pickup truck and the other which allows ITC.
Starting with not allowing ITC, since these pickup trucks are built on chassis of SUVs for example Toyota Hilux is based on ToyotaFortuner and these vehicles are marketed as adventure vehicles, for example tag line of Isuzu V-cross D MAX is “BUILT FOR ADVENTURE” making them at par with 4×4 car (more precisely as SUV), moreover these vehicles have child seat car attachment which clearly make them a car, since no goods transport vehicle comes with a child car attachment (at least so far in India). Furthermore, to drive lifestyle truck no special license is required a normal LMV license holder can drive this vehicle unlike other pickup truck which required LMV TR license, which make lifestyle pickup truck at par with normal cars.
Whereas the other set of argument is that since, these are still pickup trucks thus should be considered at par with other pickup trucks like Tata Ace which are used for transportation of goods pickup trucks should not be artificially divided in segments based on whether these are luxury or non-luxury. Furthermore, a reference can also drawn from other countries such as from United States of America where small businesses widely use pickup trucks due to their durability, off-road capability, and cargo-handling efficiency which solidifying their role in commercial operations.
All in all, the eligibility of ITC on lifestyle pickup truck will be dependent on whether it would be considered as Motor vehicle for transport of passenger or not? In other words, the interpretation of word transport of passenger and to what other criteria the vehicle must fulfill to be a goods transport vehicle.
Conclusion:
The discussion around the eligibility of ITC on lifestyle pickup trucks hinges on a crucial interpretational challenge: whether such vehicles are to be classified as motor vehicles for the transportation of goods or as vehicles for the transportation of persons under GST law. While Section 17(5)(a) of the CGST Act, 2017 restricts ITC on motor vehicles designed for transportation of persons having a seating capacity of up to 13 persons (except under specified circumstances), it does not restrict ITC on vehicles used for the transportation of goods.
Therefore, the eligibility of ITC on lifestyle pickup trucks in India will ultimately depend on how authorities interpret the phrase “motor vehicle for transportation of persons” and the extent to which cargo-handling capabilities and actual business use are taken into account. A definitive position in this regard may only emerge through clarificatory circulars or judicial pronouncements. Until then, businesses purchasing such vehicles must evaluate their usage and consider the potential litigation risk before availing ITC.
This article is a part of Article Writing Competition 2025.
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