GST input tax credit on employee transport: buses qualify after amendment, while car hire remains blocked under rent-a-cab rules.

Input tax credit on GST for hiring buses and cars to transport employees was examined under the general credit conditions in section 16 and the blocked credit rule for rent-a-cab services in section 17(5). Hiring of buses was treated as rent-a-cab for the earlier period, so credit was blocked before the statutory amendment; after 30.08.2018, credit became available for buses with approved seating capacity of more than thirteen persons when used for transportation of employees. Hiring of cars continued to fall within the blocked credit provision, and the amendment did not extend credit to vehicles with seating capacity of not more than thirteen persons. Credit was therefore allowed only for qualifying buses after the amendment and denied for cars.

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Issues: (i) Whether input tax credit on GST charged for hiring of buses for transportation of employees was admissible, and whether the rent-a-cab restriction applied. (ii) Whether input tax credit on GST charged for hiring of cars for transportation of employees was admissible, and whether the rent-a-cab restriction applied.

Issue (i): Whether input tax credit on GST charged for hiring of buses for transportation of employees was admissible, and whether the rent-a-cab restriction applied.

Analysis: The entitlement to input tax credit was examined under the general conditions in section 16 of the Central Goods and Services Tax Act, 2017, together with the blocking provision in section 17(5). The service of hiring buses for carrying employees was treated as falling within rent-a-cab for the relevant period, so the restriction under section 17(5)(b)(iii) applied before the statutory amendment. The later amendment enlarged the availability of credit for motor vehicles used for transportation of persons having approved seating capacity of more than thirteen persons when used for taxable passenger transportation.

Conclusion: Input tax credit on buses was admissible after 30.08.2018 where the buses had approved seating capacity of more than thirteen persons and were used for transportation of employees, but it was not admissible for the prior period.

Issue (ii): Whether input tax credit on GST charged for hiring of cars for transportation of employees was admissible, and whether the rent-a-cab restriction applied.

Analysis: The service of hiring cars for employee transportation was held to fall within rent-a-cab and remained covered by the blocked credit provision. The amendment did not extend credit to motor vehicles having approved seating capacity of not more than thirteen persons, including the driver, when used for transportation of passengers in the manner claimed.

Conclusion: Input tax credit on cars was not admissible, and the rent-a-cab restriction continued to apply.

Final Conclusion: The ruling was modified to allow credit only for qualifying buses after the statutory amendment, while denying credit for cars.

Ratio Decidendi: Credit is blocked for rent-a-cab services under the GST law except where the statutory exception applies, and after the amendment credit is available for motor vehicles used for transportation of persons only if they have approved seating capacity of more than thirteen persons and are used for taxable passenger transportation.

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