2019 (4) TMI 1824 - AAAR - GST

Input tax credit rules for employee transportation under GST clarified by Appellate Authority

In Re: M/s. YKK India Private Limited

In Re: M/s. YKK India Private Limited - 2020 (34) G.S.T.L. 670 (App. A. A. R. - GST - Haryana) Issues Involved:1. Eligibility for input tax credit on GST charged for hiring buses and cars for employee transportation.2. Applicability of restriction on 'Rent a Cab' service under Section 17(5)(b)(iii) to input tax credit for hiring buses and cars.Detailed Analysis:1. Eligibility for Input Tax Credit on GST Charged for Hiring Buses and Cars:The appellant, engaged in the supply of slide fasteners, uses various goods and services, including transportation services for employees, and pays applicable GST. The appellant entered into contracts with transportation service providers for hiring buses and cars to facilitate employee transportation to remote factory locations. The invoices raised by contractors include GST classified under HSN 996413, attracting 18% GST.The appellant sought advance ruling on whether they are eligible for input tax credit on GST charged by contractors for hiring buses and cars. The Advance Ruling Authority ruled that input tax credit is not available for GST charged on hiring buses and cars. The appellant contended that the ruling violated principles of natural justice as it did not consider the Department's comments, which agreed with the appellant's eligibility for input tax credit.2. Applicability of Restriction on 'Rent a Cab' Service:The appellant argued that 'hiring' is different from 'renting' and thus the restriction on 'Rent a Cab' service specified in Section 17(5)(b)(iii) should not apply. They cited various legal precedents to support their claim that hiring does not transfer possession and control of the vehicle to the hirer, unlike renting.The Advance Ruling Authority, however, found that any commercial vehicle hired for passenger transportation falls under 'rent-a-cab,' making the supply ineligible for input tax credit under Section 17(5). The Authority noted that the appellant did not challenge the classification of hired vehicles as cabs.Discussion and Findings:The Appellate Authority examined whether 'renting' differs from 'hiring' and whether input tax credit on GST charged for hiring vehicles is admissible under the restrictions of Section 17(5)(b)(iii). The Authority referred to the Finance Act and judicial precedents, concluding that the taxing statute does not distinguish between renting and hiring. Both terms are used synonymously, and the service provided under a rent-a-cab scheme is taxable regardless of possession and control.The Authority also considered the amendments to the CGST Act, 2017, which extended input tax credit to motor vehicles with an approved seating capacity of more than thirteen persons when used for taxable supplies of passenger transportation. Thus, the appellant is eligible for input tax credit on GST charged for hiring buses with more than thirteen seats after the amendment effective from 30.08.2018.Rulings:1. Hiring of Buses for Employee Transportation:- Before 30.08.2018: Input tax credit on GST charged for hiring buses is not admissible.- After 30.08.2018: Input tax credit on GST charged for hiring buses with more than thirteen seats is admissible.2. Hiring of Cars for Employee Transportation:- Input tax credit on GST charged for hiring cars is not admissible both before and after 30.08.2018.3. Applicability of 'Rent a Cab' Restriction to Buses:- The restriction on 'Rent-a-Cab' service applies to input tax credit on GST charged for hiring buses before 30.08.2018. Post-amendment, there is no restriction for buses with more than thirteen seats.4. Applicability of 'Rent a Cab' Restriction to Cars:- The restriction on 'Rent-a-Cab' service applies to input tax credit on GST charged for hiring cars, and this remains unchanged even after the amendment.Order:The Advance Ruling dated 11.07.2018 is modified as specified in the rulings above.