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

Input tax credit on inward supply of motor vehicles is barred where the vehicles are used for a rent-a-cab arrangement and do not fall within a statutory exception. On the facts, the service was treated as renting of a motor vehicle under SAC 9966, because the consideration was for the right to use the vehicle for a specified period rather than for passenger transportation under SAC 9964. As the activity was not passenger transport, the credit exception for transportation of persons did not apply, and input tax credit was held inadmissible.

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Issues: Whether input tax credit is admissible on the inward supply of motor vehicles used for supplying rent-a-cab service.

Analysis: The relevant restriction on input tax credit applies to inward supply of motor vehicles meant for transportation of persons having approved seating capacity of not more than thirteen persons, except in the specified situations. The decisive question was whether the applicant's activity was passenger transportation service or renting/hiring of a motor vehicle. On the facts reflected in the invoices and the nature of billing, the service was found to be renting of a motor vehicle under SAC 9966, not transportation of passengers under SAC 9964. The consideration was for the right to use the vehicle for a specified duration and not for the distance travelled as a passenger transport service. Since the service supplied was renting of a motor vehicle, the exception permitting credit for transportation of passengers did not apply.

Conclusion: Input tax credit on the inward supply of motor vehicles for rent-a-cab service is not admissible and the ruling is against the applicant.

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