Input Tax Credit allowed on GST for hiring buses post-01.02.2019

The ruling confirmed that Input Tax Credit (ITC) is available to the applicant on GST charged for hiring buses with seating capacity of more than thirteen persons post-01.02.2019. It was concluded that GST is not applicable on amounts recovered from employees for using the bus transportation facility. Additionally, ITC will be restricted to the extent of the cost borne by the applicant.

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Issues Involved:
1. Availability of Input Tax Credit (ITC) on GST charged by the service provider for hiring buses with seating capacity of more than thirteen persons for employee transportation.
2. Applicability of GST on amounts recovered from employees for using the bus transportation facility.
3. Restriction of ITC to the extent of the cost borne by the Applicant.

Issue-wise Detailed Analysis:

1. Availability of ITC on GST charged for hiring buses:
The applicant, engaged in manufacturing and supplying Homeopathic Medicines, sought clarity on the availability of ITC on GST charged for hiring buses with a seating capacity of more than thirteen persons for transporting employees. The applicant argued that the expenses incurred for leasing, renting, or hiring motor vehicles for employee transportation are used in the course or furtherance of business, making them eligible for ITC under Section 16 of the CGST Act. The amendment to Section 17(5)(b)(i) of the CGST Act, effective from 01.02.2019, allows ITC on motor vehicles with seating capacity exceeding thirteen persons. The ruling confirmed that ITC is available post-01.02.2019, provided the vehicle meets the seating capacity criteria and other conditions under Section 16(1) and 16(2) are fulfilled.

2. Applicability of GST on amounts recovered from employees:
The applicant sought clarity on whether GST is applicable on nominal amounts recovered from employees for using the bus transportation facility. The ruling referred to Schedule III of the CGST Act, which states that services by an employee to the employer in the course of employment are neither treated as a supply of goods nor services. Since the applicant is not supplying any services to its employees, the ruling concluded that GST is not applicable on the amounts recovered from employees for the transportation facility.

3. Restriction of ITC to the extent of the cost borne by the Applicant:
The applicant inquired if ITC would be restricted to the extent of the cost borne by the employer. The ruling referenced the decision by the Hon’ble High Court of Bombay in CCE Nagpur Vs. Ultratech Cement Ltd., which held that ITC is available for the manufacturing of the final product but not for the amount reimbursed by employees. Therefore, the ruling concluded that ITC would be restricted to the extent of the cost borne by the applicant.

Ruling Summary:
- ITC is available to the applicant on GST charged by the service provider for hiring buses with seating capacity of more than thirteen persons, effective from 01.02.2019.
- GST is not applicable on the amounts recovered from employees for using the bus transportation facility.
- ITC will be restricted to the extent of the cost borne by the applicant (employer).

This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.

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