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ITC on Hiring of Buses & Cars for Transportation of Employees

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.

RAI PREXIM INDIA PRIVATE LIMITED Vs STATE TAX OFFICER (WP(C).No.39022 of 2018)

Brief Facts of the Case: In the given case the petitioner's goods have been detained on account of discrepancy in e-Way bill. The first e-Way bill generated by the petitioner is produced as Ext.P4. Therein, the place of delivery was mentioned as 'Payhanamthitta, Kerala - 686547'. The value of the goods is shown as Rs.3882200/-. Noting that the mention of place of delivery as 'Payhanamthitta' is a mistake, that e-Way bill was cancelled and the petitioner generated another e-Way bill produced as Ext.P5. In Ext.P5, the place of delivery was correctly shown as 'Pathanamthitta'. However, the value of the goods was mentioned as Rs.388220/- instead of Rs.3882200. Taking exception to this e Way bill, goods have been detained.


View of Court: After analyzing of the submission made by the petitioner and respondent the court put their view that If a human error which can be seen on naked eye is detected, such human error cannot be capitalised for penalisation. Normally, this Court could not have persuaded to accept the contention on prima facie value as it is a matter for decision by competent authority and this Court can only order release of the vehicle and goods as against Bank guarantee. But I am persuaded to adopt a different course for the simple reason that if the petitioner had paid the IGST in accordance with the value as shown in the original bill, goods cannot be detained and shall be released to the petitioner.

 


Order Passed: Therefore, the following orders are issued. On verification, if it is found that the petitioner had paid the IGST in accordance with the value shown in Ext.P4, the vehicle and the goods shall be released to the petitioner on executing a simple bond. However, if it is found that the petitioner had not paid the IGST according to the value shown in Ext.P4, the petitioner's goods and vehicle need be released only on furnishing bank guarantee. This writ petition is disposed of as above.

Schedule I - Activities to be treated as supply even if made without consideration

SCHEDULE I.

 

[ See section 7 ]

 

ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

 

(1) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

 

(2) Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

 

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

 

(3) Supply of goods-

 

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

 

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

 

(4) Import of services by a 1[person] from a related person or from any of his other establishments outside India, in the course or furtherance of business.

 

Schedule II - Activities or transaction to be treated as supply of goods or supply of services


SCHEDULE II .

 

[ See section 7]

 

ACTIVITIES 1 [OR TRANSACTIONS] TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

 

1. Transfer

 

(a) any transfer of the title in goods is a supply of goods;

 

(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services;

 

(c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.

 

2. Land and Building

 

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;

 

(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

 

(3) Treatment or process

 

Any treatment or process which is applied to another person's goods is a supply of services.

 

(4) Transfer of business assets

 

(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, 2 [****]such transfer or disposal is a supply of goods by the person;

 

(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, 2 [****] the usage or making available of such goods is a supply of services;

 

(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless-

 

(i) the business is transferred as a going concern to another person; or

 

(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

 

5. Supply of services

 

The following shall be treated as supply of services, namely:-

 

(a) renting of immovable property;

 

(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

 

Explanation. -For the purposes of this clause-

 

(1) the expression "competent authority" means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:-

 

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or

 

(ii) a chartered engineer registered with the Institution of Engineers (India); or

 

(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

 

(2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure;

 

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;

 

(d) development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software;

 

(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and

 

(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

 

6. Composite supply

 

The following composite supplies shall be treated as a supply of services, namely:-

 

(a) works contract as defined in clause (119) of section 2; and

 

(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

 

7. 3 [****]

 

Schedule III - Activities which shall be treated neither as a supply of goods nor a supply of services

SCHEDULE III.

 

[ See section 7 ]

 

ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES

 

1. Services by an employee to the employer in the course of or in relation to his employment.

 

2. Services by any court or Tribunal established under any law for the time being in force.

 

3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;

 

(b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

 

(c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

 

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

 

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

 

6. 3[Specified actionable claims].

 

*7. 1[Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

 

*8. (a) Supply of warehoused goods to any person before clearance for home consumption;

 

(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.]

 

2[Explanation 1.-For the purposes of paragraph 2, the term "court" includes District Court, High Court and Supreme Court.

 

*1[Explanation 2.- For the purposes of paragraph 8, the expression "warehoused goods" shall have the same meaning as assigned to it in the Customs Act, 1962 (50 of 1962).]

 

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