Karnataka AAR Allows ITC on Ancillary Expenses for Used Vehicles Sold Under Margin Scheme

• Karnataka AAR ruled that ITC is admissible on ancillary expenses (input services and capital goods) even when used motor vehicles are supplied under the margin scheme.
• The restriction on ITC under the Margin Scheme Notification applies only to the used motor vehicles themselves, not to other inward supplies.
• Ancillary expenses such as refurbishment, repairs, marketing, rent, and administrative costs are eligible for ITC if they are used in the course or furtherance of business.
• The ruling reaffirms that ITC restrictions must be interpreted strictly and cannot be extended beyond the express language of the notification.
• Taxation under the margin scheme does not dilute the general GST principle of credit neutrality unless specifically barred.

Source: taxand.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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