ITC on Hiring of Buses & Cars for Transportation
of Employees
Authority for Advance Ruling – Haryana
Order
No. HAR/HAAR/R/2018-19/04
M/S
YKK India Private Ltd. Dated
11th July, 2018
Executive
Summary: Both AAR & AAAR has held that ITC is not available of GST charged
by contractor for hiring of cars or buses for transportation of employees in
view of specific provision of section 17(5)(b) of CGST Act, 2017. However, post
CGST Amendment Act, 2018 w.e.f. 1st February, 2019, the ITC of
renting, leasing or hiring of buses would be available.
1. Relevant Sections/Rules & Notification/Circulars
on the Subject:
·
Section 16(1) of
the CGST Act, 2017
·
Section 17(5)(b)
of CGST Act, 2017;
·
Sections 2(22),
2(25), 2(28), 2(29) & 74 of the Motor Vehicles Act.
2. Facts and contentions submitted by applicant:
·
The applicant is
engaged in the business of supply of slide fasters, chains, sliders etc.
(“Zipper” or Final Product”).
·
The Factories of
the Applicant are situated at remote location in Haryana where public transport
is very minimal which hinders transportation of employees to reach the
factories.
·
Accordingly, in
order to carry out its business of supply of its Final Product and for
efficient functioning of its business as whole, the Applicant has engaged
various contractual service providers who provide transportation services and
ensure that employees of the Applicant are able to reach the factories in time
for doing their day-to-day work as scheduled.
3. Questions raised before AAR:
·
Whether the
applicant is eligible to take input tax credit on:
a)
GST charged by
the Contractor for hiring of buses for transportation of employees?
b)
GST charged by
the Contractor for hiring of cars for transportation of employees?
·
Whether the
restriction on “Rent a Cab” service specified in section 17(5)(iii) is
applicable to input tax credit on:
a)
GST charged by
the Contractor for hiring of buses for transportation of employees?
b)
GST charged by
the Contractor for hiring of cars for transportation of employees?
4. Discussion &Ruling by AAR:
·
The services of
the Contractor for hiring of buses/cars for transportation employees qualify as
“rent-a-cab” services. Further, it is also observed that nothing has been
brought on record to suggest that the impugned service is not a service which
is obligatory for an employer to provide its employees under any law for the
time being used by the applicant for making an outward taxable supply of the
same category of services or as part of a taxable composite or mixed supply.
·
Accordingly, the
applicant is not eligible for input tax credit of GST charged by the Contractor
for hiring of buses/cars for transportation of employees.
In view of above, AAR ruled the following:
·
The applicant is
not eligible to take input tax credit on:
a)
GST charged by
the Contractor for hiring of buses for transportation of employees.
b)
GST charged by
the Contractor for hiring of cars for transportation of employees.
·
The restriction
on “Rent a Cab” service specified in Section 17(5) (b) (iii) is applicable to
input tax credit on:-
a)
GST charged by
the Contractor for hiring of buses for transportation of employees.
b)
GST charged by
the Contractor for hiring of cars for transportation of employees.
5. Ruling by AAAR:
AAAR vide its order no. HAR/AAAR/2018-19/03 dated 3rd
April, 2019 has principally upheld the order passed by AAR with a further
mention of the fact, post CGST Amendment Act, 2018, the input tax credit would
be available in respect of motor vehicles having seating capacity of more than
thirteen persons used for transportation of employees.
6. Admin Comment:With
the introduction of new provisions w.e.f. 1st February, 2019 ITC on
renting, leasing and hiring of motor vehicles have been disallowed only for
vehicles having seating capacity upto 13 seats. In view of aforesaid amendment,
ITC can be availed on service of leasing, renting or hiring of motor vehicles
on satisfaction of following conditions:
·
The vehicle has
approved seating capacity of more than 13 persons (including driver)
·
The service of
leasing, renting, or hiring is used for furtherance of business as per section
16(1)
Therfore, ITC can be availed if it obligatory for an
employer to provide the same to its employees under any law for the time being
in force and is used in furtherance of business.
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