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ITC will be available of the cess paid on purchase of motor vehicles if used in providing service of transportation of passengers or renting of motor vehicles.

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Authority for Advance Ruling — ITC of CC paid on purchase of vehicles used for rental business – The applicant is supplying services of transportation of passengers or renting of Motor Vehicles (internally called as RAC business) and also leasing of vehicles. The petitioner operates the renting and leasing business as separate division. The motor vehicles procured for renting business are exclusively used for the said business and the same are not interchanged with those in respect of leasing business at any point of time until their disposal. The motor vehicles purchased for the above business is capitalized in the books of accounts. The petitioner sought an advance ruling on the eligibility to take credit of the ITC of the cess paid on purchase of motor vehicles used in providing services of transportation of passengers or renting of motor vehicles.
Held that:- The Hon’ble Authority for Advance Ruling ruled out that in terms of provisions of Rule 43, the applicant is eligible to ITC of Compensation Cess paid on the purchase of vehicles used for rental business. Such ITC shall be reversed every month equally apportioned over the prescribed period of 60 months to the extent of usage of exempted supply of service.—Orix Infrastructure Services Limited, In Re… [2019] 10 TAXLOK.COM 058 (AAR-Kerala)

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