GST exemption for bus hire to a State transport undertaking upheld under the motor vehicle hire entry.

Hiring or leasing of buses by a transport corporation to a State Government public transport department was held to fall within Entry 22 of Notification No. 12/2017-Central Tax (Rate), because the buses were meant to carry more than twelve passengers and the department was treated as a State Transport Undertaking by reference to section 2(42) of the Motor Vehicles Act, 1988. The service was therefore regarded as giving a motor vehicle on hire to a qualifying State Transport Undertaking, and the supply was exempt from GST.

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Issues: Whether the hiring or leasing of buses by APSRTC to the Public Transport Department of the Government of Andhra Pradesh is eligible for exemption under Entry 22 of Notification No. 12/2017-Central Tax (Rate).

Analysis: Entry 22 exempts services by way of giving on hire to a State Transport Undertaking of a motor vehicle meant to carry more than twelve passengers. The vehicle-capacity condition was found to be satisfied. Since the GST enactments do not define "State Transport Undertaking", the Authority referred to the definition in section 2(42) of the Motor Vehicles Act, 1988, which includes transport service carried on by a State Government. The Public Transport Department created under the State Government was treated as an undertaking carrying on road transport service for this purpose, and the hire service supplied by APSRTC to that department was regarded as falling within the exemption entry.

Conclusion: The transaction is covered by Entry 22 of Notification No. 12/2017-Central Tax (Rate) and is exempt.

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