Input tax credit on rent-a-cab vehicles denied where the service was treated as motor vehicle renting, not passenger transportation.

Input tax credit on motor vehicles used for a rent-a-cab business was held inadmissible because the supply was characterised as renting of a motor vehicle, not passenger transportation. The service was examined by its commercial character and GST classification: passenger transportation under SAC 9964 is taxed by distance travelled, whereas renting or hiring under SAC 9966 gives the recipient the right to use the vehicle for a specified period against rental consideration. On the invoices and contract structure, the service was time-based, with distance used only as a fuel-cost factor beyond a threshold, so the restriction in section 17(5)(b)(i) applied and credit on motor vehicles and related inputs was not available.

---

---

Issues: Whether input tax credit on motor vehicles used for supplying rent-a-cab service is admissible under the GST law.

Analysis: The service was examined by reference to its commercial character and the relevant service classifications. Passenger transportation service falls under SAC 9964 and is taxed as transportation of passengers, where the consideration is for the distance travelled. Renting or hiring of motor vehicles falls under SAC 9966, where the recipient obtains the right to use the vehicle for a specified duration and the consideration is for renting, not for transportation as such. On the materials and invoices, the service supplied was found to be cab rental to institutional recipients on a time-based consideration structure, with distance used only as a fuel-cost factor beyond a threshold. The Authority therefore held that the supply was renting of a motor vehicle and not passenger transportation service. In that situation, the credit restriction under section 17(5)(b)(i) applied, and input tax credit on the purchase of motor vehicles or related inputs was not available.

Conclusion: Input tax credit on the purchase of motor vehicles for supplying rent-a-cab service is not admissible.

---