Hiring of staff transport buses treated as taxable motor vehicle renting, not exempt passenger transport, under GST notification.

Supply of non-air-conditioned buses for staff transport on hire, where the recipient exercised effective control over deployment and use, was not treated as exempt transportation of passengers under Notification No. 12/2017-Central Tax (Rate). The arrangement was characterised as renting of a motor vehicle designed to carry passengers, with fuel included in the consideration, so the service fell within the taxable rental-service entry under Notification No. 11/2017-Central Tax (Rate). The applicable GST rate was 5% without input tax credit or 12% with input tax credit, and the exemption claim was rejected.

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Issues: (i) whether the supply of non-air-conditioned buses for transporting staff under contract carriage was covered by serial no. 15 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017; (ii) whether the activity was taxable as rent-a-cab service and, if so, the applicable rate of tax.

Issue (i): whether the supply of non-air-conditioned buses for transporting staff under contract carriage was covered by serial no. 15 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Analysis: The service was found to be a hiring arrangement for buses owned by the supplier, with the recipient exercising effective control over deployment, operation, and use of the vehicles. The consideration was charged by the bus and the recipient was the company, not the individual passengers. On these facts, the activity did not answer the description of transportation of passengers by a non-air-conditioned contract carriage for exemption purposes, and the exclusion for hire remained material.

Conclusion: The exemption under Notification No. 12/2017-Central Tax (Rate) was held to be inapplicable, against the assessee.

Issue (ii): whether the activity was taxable as rent-a-cab service and, if so, the applicable rate of tax.

Analysis: The supply was characterised as renting of a motor vehicle designed to carry passengers, with fuel cost included in the consideration. In the absence of eligibility to the exemption entry, the service fell within the taxable rental-services entry under Notification No. 11/2017-Central Tax (Rate), as amended. The applicable rate depended on whether input tax credit was availed.

Conclusion: The service was held to be rent-a-cab service taxable at 5% without input tax credit or 12% with input tax credit, against the assessee.

Final Conclusion: The supply was not exempt under the passenger-transport notification and was liable to GST as a taxable rental service under the applicable rate entry.

Ratio Decidendi: Where buses are supplied on hire for staff transport under the recipient's effective control and the recipient, not the passengers, is the service recipient, the activity is renting of a motor vehicle rather than exempt transportation of passengers.

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