2019 (2) TMI 1081 - AAR - GST

Input Tax Credit denied for GST on employee transportation services due to 'rent-a-cab' restriction.

The Authority ruled that the applicant is not eligible to claim Input Tax Credit (ITC) on the GST charged by the contractor for hiring buses and cars for ... Input tax credit - rent-a-cab - exclusion under Section 17(5)(b)(iii) - commercial hiring of passenger vehicles - use in course or furtherance of businessInput tax credit - rent-a-cab - commercial hiring of passenger vehicles - exclusion under Section 17(5)(b)(iii) - Applicant not eligible to claim input tax credit of GST charged by the contractor for hiring of buses and cars for transportation of employees; the restriction on 'rent-a-cab' in Section 17(5)(b)(iii) applies. - HELD THAT: - The Authority examined whether the services supplied by the contractor fall within the commercial understanding of 'rent-a-cab'. In absence of a statutory definition in the CGST/HGST Act, common parlance and earlier service-tax era definitions were relied upon. Dictionary meanings and the Finance Act, 1994 definitions show that a 'cab' or hired vehicle carrying passengers on hire or rent is encompassed by the phrase 'rent-a-cab', and that 'hiring' and 'renting' are not materially distinct for this purpose. The contractor's provision of buses and cars on hire for transporting employees therefore falls within the ordinary meaning of 'rent-a-cab' or hiring of passenger motor vehicles. The Authority found no material on record to show that such services are obligatory for the employer under any law or that the inward supply of such services is used for making an outward taxable supply of the same category or as part of a taxable composite or mixed supply. Consequently, the exclusion in Section 17(5)(b)(iii) operates to deny input tax credit on the GST charged by the contractor for those services. [Paras 13, 15, 16]Input tax credit on GST paid for hiring of buses and cars for employee transportation is not admissible; Section 17(5)(b)(iii) applies.Final Conclusion: Advance ruling: the applicant is not eligible to take input tax credit on GST charged by the contractor for hiring buses or cars for transportation of employees, and the restriction under Section 17(5)(b)(iii) is applicable. Issues Involved:1. Eligibility of input tax credit (ITC) on GST charged for hiring buses for employee transportation.2. Eligibility of ITC on GST charged for hiring cars for employee transportation.3. Applicability of the restriction on 'Rent-a-Cab' services under Section 17(5)(b)(iii) of the CGST/HGST Act, 2017.Issue-wise Detailed Analysis:1. Eligibility of Input Tax Credit on GST Charged for Hiring Buses for Employee Transportation:The applicant, M/s. YKK India Private Limited, engaged in manufacturing slide fasteners and other products, hires buses to transport employees to its factories located in remote areas. The applicant pays GST on the transportation services provided by contractors and seeks to claim ITC on this GST.The Authority examined the relevant provisions, particularly Section 16 of the CGST/HGST Act, 2017, which allows registered persons to claim ITC on supplies used in the course or furtherance of business. However, Section 17(5) lists exceptions where ITC is not allowed, including 'rent-a-cab' services.The Authority analyzed the term 'rent-a-cab' using various dictionary definitions and concluded that it includes hiring any motor vehicle designed to carry passengers, including buses. Therefore, the hiring of buses for employee transportation falls under the 'rent-a-cab' category, making the GST paid on such services ineligible for ITC under Section 17(5)(b)(iii).2. Eligibility of Input Tax Credit on GST Charged for Hiring Cars for Employee Transportation:Similar to the buses, the applicant also hires cars for employee transportation and pays GST on these services. The applicant contends that these services should not be classified as 'rent-a-cab' since they do not take control of the vehicles, which remain with the contractor.The Authority reiterated its analysis of the term 'rent-a-cab' and confirmed that it includes hiring cars for passenger transportation. Thus, the GST paid on hiring cars for employee transportation also falls under the 'rent-a-cab' category, making it ineligible for ITC under Section 17(5)(b)(iii).3. Applicability of the Restriction on 'Rent-a-Cab' Services Under Section 17(5)(b)(iii):The Authority examined whether the restriction on 'rent-a-cab' services applies to the applicant's case. The applicant argued that the services obtained do not fall under 'rent-a-cab' since they do not take control of the vehicles, and the vehicles remain with the contractor.However, the Authority referred to the definitions and judicial precedents, including the case of Commissioner of Service Tax Vs. Vijay Travels, which clarified that 'renting' and 'hiring' are synonymous. The Authority concluded that the services provided by the contractor, whether buses or cars, qualify as 'rent-a-cab' services.The Authority also noted that there was no evidence to suggest that the transportation services were obligatory for the employer to provide under any law or that the services were used to make an outward taxable supply of the same category.Conclusion:The Authority ruled that the applicant is not eligible to claim ITC on the GST charged by the contractor for hiring buses and cars for employee transportation. The restriction on 'rent-a-cab' services specified in Section 17(5)(b)(iii) applies to both cases, making the GST paid on these services ineligible for ITC.Advance Ruling:1. The applicant is not eligible to take ITC on:a. GST charged for hiring buses for employee transportation.b. GST charged for hiring cars for employee transportation.2. The restriction on 'Rent-a-Cab' services specified in Section 17(5)(b)(iii) is applicable to ITC on:a. GST charged for hiring buses for employee transportation.b. GST charged for hiring cars for employee transportation.Decided accordingly.