No GST Input Tax Credit on Motor Vehicles Used as Mobile Labs
The Andhra Pradesh GST Authority ruled that businesses cannot claim input tax credit on vehicles used as mobile testing labs.
- Ruling
- Order No. AAR/AP/6 (GST)/2018 dated 08.06.2018
- Dated
- 08 Jun 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Indian Cotton Solutions asked if GST paid on vehicles used as mobile labs is claimable.
- The GST authority ruled that input tax credit on these vehicles is strictly blocked.
- Motor vehicles qualify for tax credit only under specific exceptions like goods transport.
- Mounting specialized equipment on a vehicle does not override GST blocked credit rules.
In short
Indian Cotton Solutions.com Private Limited asked whether they could claim input tax credit (ITC) on motor vehicles bought to serve as mobile cotton testing laboratories. The company had fitted testing equipment directly onto five vehicles to provide on-site services to farmers and buyers. They argued that because the vehicles were essential to their core service, the GST paid on buying them should be available as tax credit or refund.
What has changed
How it worked before
Many businesses assumed that if a vehicle was used directly as a core business tool rather than for general transport, the GST paid on purchasing it could be claimed back.
What has changed
The Andhra Pradesh Authority for Advance Ruling (AAR/AP/06(GST)/2018) decided that input tax credit on motor vehicles is blocked under Section 17(5) of the GST Act, regardless of how crucial the vehicle is to business operations. The tax law only allows credit on vehicles used for reselling vehicles, transporting passengers, driving schools, or transporting goods. Because a mobile lab does not fit any of these specific exceptions, the company cannot claim or refund the GST paid on those vehicles.
Who this affects
Any business in India that buys motor vehicles to use as mobile facilities, such as mobile clinics, testing labs, display vans, or service units.
An example
A soil-testing firm buys three vans and fits them with lab machinery to test soil at customer farms. The firm wants to know if it can claim input tax credit on the GST paid while purchasing the vans. Based on ruling AAR/AP/06(GST)/2018, the GST office will likely treat these vans as blocked credit because mobile labs are not an allowed exception under Section 17(5). Therefore, the soil-testing firm would need to treat the GST paid as a cost rather than a tax credit.
What you should do
Businesses should not automatically claim GST credit on specialized vehicles, even if fitted with equipment. Remember that an advance ruling binds only the applicant and their specific tax office. If you operate a similar business, consult a tax advisor or consider applying for your own advance ruling before claiming input tax credit on vehicles.
If you do nothing
If you claim input tax credit on motor vehicles without meeting the strict legal exceptions, tax officers can reject your claim during an audit. You will have to repay the claimed credit along with 18% annual interest and potential penalties. Incorrectly claiming blocked credit can also lead to tax notices and unnecessary legal costs.
The terms explained
- input tax credit
- The GST a business pays on its purchases, which it can deduct from the GST it collects on its sales.
- blocked credit
- Specific purchases listed under GST law for which a business is not allowed to claim tax credit, even if bought for business use.
- advance ruling
- An official decision given by tax authorities to a specific business clarifying how GST laws apply to its planned transactions.
The ruling in detail
Authority for Advance Ruling
M/s INDIAN COTTON SOLUTIONS.COM PRIVATE LIMITED
Order No. AAR/AP/6 (GST)/2018 dated 08.06.2018 · Andhra Pradesh
Questions before the authority
- Whether they can utilize /refund the ITC which is readily available in GST Portal, for the vehicles purchased by them for the purpose of their core business activity?
Facts
The applicant is engaged in supplying mobile laboratory services to test the quality of cotton. For this core activity, the applicant purchased five motor vehicles to use as mobile testing labs, mounting quality-testing equipment directly onto them. The applicant approached the Authority to clarify whether Input Tax Credit (ITC) paid on the purchase of these vehicles can be claimed or refunded.
Ruling
| Question | What the authority ruled |
|---|---|
| ITC eligibility/refund on vehicles purchased for core business use as mobile labs | Not entitled to claim ITC Does not fall within the statutory exceptions under Section 17(5) |
The Authority held that the motor vehicles purchased for mobile testing laboratories do not fall under any of the permissible exceptions listed under Section 17(5) of the GST Act. Consequently, the applicant is **not entitled to claim or utilize Input Tax Credit** on these vehicles.
Reasoning
The decision turned on the interpretation of Section 17(5) of the CGST/APGST Act, 2017, which explicitly restricts Input Tax Credit on motor vehicles and conveyances. The statutory exceptions allowing ITC on motor vehicles are limited to cases where they are used for further supply of such vehicles, passenger transportation, driving training, or goods transportation. The Authority observed that using vehicles as mobile testing labs does not satisfy any of these statutory exceptions, making the ITC strictly blocked.
Provisions relied on
- Section 17(5) of CGST Act, 2017
- Section 17(5) of APGST Act, 2017
For the practitioner
This ruling confirms that the **blocked credit provisions under Section 17(5)** apply strictly based on the nature of the asset (motor vehicle), regardless of whether the vehicle is essential or integral to performing the business's core services. Tax practitioners should note that mounting specialized equipment or using vehicles as mobile business facilities does not override the specific statutory exclusion for motor vehicles.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/ap_06-2018_08.06.18_icscpl.pdf
Legibility of the scan, as read: high.
Prepared 19-10-2026.
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