ITC Can be Claimed on Ancillary Expenses Incurred for Refurbishing Used Cars: AAR

The applicant, Toyota Mobility Solution and Services India Pvt Ltd, buys and sells used motor vehicles. The used cars are refurbished and then sold to the end customers. The applicant has to incur various ancillary expenses while buying the used cars. These expenses include refurbishment charges, professional fees, marketing and advertising expenses, and software subscriptions.

The applicant company sought an advance ruling before the Karnataka Authority for Advance Ruling (AAR) in the following issue:

“a) Whether the company can avail ITC on expenses incurred on goods and services other than vehicle purchases, where the benefit of Notification No.08/2018-CGST (Rate) is availed?”

In this regard, the AAR clarified that the applicant is eligible to claim Input Tax Credit (ITC) towards the refurbishment and repair services, marketing and advertising services, professional and consultancy fees, housekeeping and security services, rent, office-related expenses, software subscriptions, manpower recruitment and staffing services, and other administrative services.

Furthermore, the authority said that the ITC can also be claimed on capital goods, including laptops, office equipment, and furniture, if the applicant company meets the conditions under Sections 16 to 21 of the CGST Act, 2017, read with Rules 36 to 45 of the CGST Rules, 2017.