APSRTC bus hiring to Government Transport Division qualifies for GST exemption under Entry 22 Notification 12/2017

AAR held that APSRTC's hiring/leasing of buses to the Public Transport Division (PTD) of Government of Andhra Pradesh qualifies for GST exemption under Entry 22 of Notification No. 12/2017 Central Tax (Rate). The ruling determined that PTD constitutes a separate undertaking operating under the Administrative control of Transport, Road and Buildings Department, fitting the definition of "Undertaking" for transport services carried by State Government, thereby making the transaction eligible for exemption.

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Issues Involved:
1. Eligibility of exemption under Entry 22 of Notification No 12/2017 Central Tax (Rate) for the transaction of hiring/leasing of buses by APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh.

Detailed Analysis:

1. Background and Context:
The applicant, Andhra Pradesh State Road Transport Corporation (APSRTC), established as per The Road Transport Act, 1950, operates independently under the Public Transport Department (PTD) of the Government of Andhra Pradesh. Recently, the state government initiated the merger of APSRTC with the state government, creating the "Public Transport Department" under the administrative control of the "Transport Roads and Buildings Department," absorbing APSRTC employees into government payroll. Consequently, the state government decided to lease all buses, establishment, and infrastructure from APSRTC to undertake public transport directly through PTD.

2. Applicant’s Interpretation of Law:
The applicant contends that the leasing of buses to PTD should be exempt from tax under Entry 22 of Notification No 12/2017 Central Tax (Rate), which exempts services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers. The applicant argues that the exemption's intent is to reduce the cost of public transport services and should apply to the state government directly, as the nature of the activity, beneficiaries, and state control remain unchanged despite the organizational restructuring.

3. Additional Submissions:
The applicant emphasizes that the definition of "state transport undertaking" under Section 2(42) of the Motor Vehicles Act, 1988, includes any undertaking providing road transport service carried on by the central or state government, municipalities, or corporations owned by the government. Therefore, PTD, being a department under the state government, qualifies as a "state transport undertaking" and should be eligible for the exemption.

4. Discussion and Findings:
The authority examined whether the hire services by APSRTC to PTD fall under the exemption provided in Entry 22 of Notification No 12/2017 Central Tax (Rate). The exemption applies if:
a) The motor vehicle is meant to carry more than twelve passengers.
b) The services are supplied to a state transport undertaking.

Since the first condition is met, the authority analyzed whether PTD qualifies as a "state transport undertaking." According to the Motor Vehicles Act, a "state transport undertaking" includes services carried on by the state government. The authority concluded that PTD, created by the Government of Andhra Pradesh and operating under the administrative control of the Transport, Road, and Buildings Department, fits the definition of an undertaking for transport carried by the state government.

5. Conclusion:
The authority concurred with the applicant’s premise that the hire services provided by APSRTC to PTD are services by way of giving on hire to a state transport undertaking. Consequently, these services are eligible for the exemption under Entry 22 of Notification No 12/2017 Central Tax (Rate).

Ruling:
The transaction of hiring/leasing of buses by APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh is eligible for the exemption under Entry 22 of Notification No 12/2017 Central Tax (Rate).

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