Indian Army vehicle hire service not exempt from GST; IGST rates clarified

The authority ruled that the service of providing non-air conditioned vehicles on hire to the Indian Army does not qualify for exemption under Notification No. 12/2017 dated 28.06.2017. The service is classified as 'rent a cab' service, subject to IGST at 5% without input tax credit, or 12% with input tax credit. The applicant must charge GST on such services as they do not meet the criteria for exemption as a non-air conditioned contract carriage under the Motor Vehicles Act.

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Issues Involved:
1. Applicability of a notification issued under the provisions of the CGST/RGST Act.
2. Determination of the liability to pay tax on non-air conditioned vehicles provided on hire to the Indian Army.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 12/2017-Central Tax (Rate):

The applicant, a registered person under GST, sought an advance ruling on whether the supply of non-air conditioned vehicles on hire to the Indian Army is exempt from GST under serial no. 15 of exemption notification no. 12/2017-Central Tax (Rate) dated 28.06.2017. The applicant argued that the exemption applies to non-air conditioned contract carriages, as defined under the Motor Vehicles Act, 1988.

The notification specifies that the transport of passengers by a non-air conditioned contract carriage, excluding radio taxis, tourism, conducted tours, charter, or hire, is exempt from GST. The applicant contended that their service does not meet the criteria for a 'contract carriage' as per the Motor Vehicles Act, which defines it as a vehicle engaged under a contract for a fixed set of passengers without picking up or setting down passengers en-route.

2. Determination of Tax Liability:

The applicant had been charging GST on all vehicles supplied to the Indian Army, but the Army refused to reimburse GST on non-air conditioned vehicles, claiming exemption under the said notification. The applicant sought clarification on whether their service qualifies for the exemption.

Findings, Analysis, and Conclusion:

Upon review, the authority concluded that the applicant's service does not qualify as a 'non-air conditioned contract carriage' under the Motor Vehicles Act. The essential characteristic of a contract carriage is that it operates under a contract for a specific group of passengers without picking up others en-route. The applicant’s service did not meet these conditions, thus failing to qualify for the exemption.

Furthermore, even if the service were considered a non-air conditioned contract carriage, the exemption notification explicitly excludes hired non-air conditioned contract carriages from exemption. Therefore, the service provided by the applicant falls under the category of 'rent a cab' service.

Ruling:

The service provided by the applicant is not exempt under Notification No. 12/2017 dated 28.06.2017. It is classified as 'rent a cab' service, attracting:
- IGST @ 5% (CGST @ 2.5% and SGST @ 2.5%) without input tax credit, except for input services in the same line of business.
- IGST @ 12% (CGST @ 6% and SGST @ 6%) if input tax credit is availed.

This ruling clarifies that the applicant must charge GST on the supply of non-air conditioned vehicles on hire to the Indian Army, as the service does not qualify for the claimed exemption.

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