ITC Allowed on Inputs Under Margin Scheme for Used Cars

Centax Editorial Board

April 29, 2026April 30, 2026

• 2 min. read

Case Details: In re: Toyota Mobility Solution and Services India Pvt. Ltd. (2026) 41 Centax 345 (A.A.R.-GST-Kar.)

Judiciary and Counsel Details

S/Shri Sivakumar S Itagi & Kalyanam Rajesh Rama Rao, Member
Shri R.K Suchindra, CA, for the Respondent.

Facts of the Case

The applicant was a GST-registered dealer engaged in the purchase and sale of old and used passenger motor vehicles. The applicant purchased used vehicles, carried out minor refurbishment, and thereafter sold the vehicles or transferred them to branches. GST was discharged on the margin under Notification No. 08/2018-CGST (Rate), dated 25-01-2018. In the course of business, the applicant incurred expenditure on inward supplies relating to refurbishment, marketing, professional services, housekeeping and security, rent, office and software services, staffing, administration, and capital goods such as laptops and furniture. The applicant sought a ruling on the eligibility of input tax credit (ITC) in respect of such inward supplies while operating under the margin scheme. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the expression ‘such goods’ used in the notification referred only to old and used motor vehicles specified in the Table. It was further held that the restriction contained in paragraph 2 of the notification applied only to ITC relating to those old vehicles themselves and not to ancillary inputs, input services, or capital goods used in the business. The Authority also held that the statutory scheme permits ITC on inward supplies used in the course or furtherance of business, subject to satisfaction of prescribed conditions and subject to blocked credit provisions, where applicable. Accordingly, the applicant was held eligible to avail ITC on the listed services and capital goods.

List of Cases Cited

Attica Gold (P.) Ltd. — Karnataka AAR No. 40/2022, dated 27-10-2022 — Referred [Para 7.10]
Government of Andhra Pradesh v. Road Rollers Owners Welfare Association — (2004) 6 SCC 210 — Referred [Para 7.7]
Gurudevantt VKSSS Maryadit v. State of Maharashtra — AIR 2001 SC 1980 — Referred [Para 7.7]
Royal Drive Pre-Owned Cars LLP — Kerala AAR No. KER/48/2024, dated 14-6-2024 — Referred [Para 7.9]
Sri Jeyaram Educational Trust v. A.G. Syed Mohideen — 2010 CIJ 273 SC (1) — Referred [Para 7.5]
Swedish Match AB v. SEBI — AIR 2004 SC 4219 — Referred [Para 7.7]