2022 (7) TMI 1100 - AAR - GST

Bus hiring services to government companies exempt from GST under Entry 22 of Notification 12/2017

In Re: M/s. Maa Associates

The MP AAR ruled that providing buses on hire to state government companies constitutes an exempt service under GST. The applicant supplied buses while ... Levy of GST - providing buses on hire (service) - supply of services to BCLL, AICTSL, JCTSL (State Government Co.) - Rate of tax - Admissibility of Input tax credit - HELD THAT:- The supply relates to transportation of passengers on behalf of the client, where the buses are operated and maintained by the applicant and management of the route, slops and collection of fee is done by the client. Therefore, the service of transportation of passengers is being provide by the client. The supply being made by the applicant is that of mode of transportation and therefore, in the nature of renting / hiring of the mode of transport. While the Uttarakhand High Court in COMMISSIONER, CUSTOMS & CENTRAL EXCISE VERSUS SACHIN MALHOTRA, RAJ KUMAR TANEJA, M/S. SHIVA TRAVELS [2014 (10) TMI 816 - UTTARAKHAND HIGH COURT] had held that Renting and Hiring are different activities and are to be treated differently for taxation under the Finance Act. 1994. the Allahabad High Court in ANIL KUMAR AGNIHOTRI VERSUS COMMISSIONER, CENTAL EXCISE KANPUR [2018 (1) TMI 171 - ALLAHABAD HIGH COURT] has departed with the Uttarakhand High Court's. Also, the Honorable Gujarat High Court in the matter of Vijay Travels has held that renting and hiring are not different so far as tax treatment for service lax is concerned. The matter is currently before the Honorable Supreme Court. The different tax liability cannot be fastened on identical service by terming them as 'rent' and 'hire'. Further, it may be noted that under the consideration under the agreement in the form of 'hire'. On a joint reading of the terms of the agreement, high court rulings. Entry No. 10 of Notification No. 11/2017 - Central Tax (Rate) and Entry No. 22 of Notification No. 12/2017 - Central Tax (Rale) it appears that supply covered under the agreement entered into by the applicant with AICTSL is covered under Entry No. 22 of Notification No. 12/2017 - Central lax (Rate) and is an exempt services - also para 8 of Board Circular No. 164/20/2021 GST dated 06.10.2021, perused, wherein it has been clarified on the recommendation of the GST Council that 'giving on hire' in Entry No. 22 of Notification No. 12/2017 - Central Tax (Rate) includes renting of vehicles. Once the supply is exempt, the question relating to rate of tax and admissibility of input Tax credit is redundant. Issues Involved:1. Tax applicability on supply of services to BCLL, AICTSL, JCTSL (State Government Companies).2. Rate of tax if the services are taxable.3. Admissibility of Input Tax Credit (ITC).Detailed Analysis:Issue 1: Tax Applicability on Supply of ServicesThe applicant, M/s Maa Associates, provides buses on hire to BCLL, AICTSL, and JCTSL, which are state government companies. The applicant sought an advance ruling on whether the services provided to these companies are taxable under GST.Discussion:- The applicant provides non-AC buses along with drivers, fuel, and maintenance services. The routes and fares are determined by the service recipients, who also collect the revenue from passengers.- The applicant raises invoices based on the effective kilometers run by the buses, as per the tender agreements with the state government companies.- The service provided by the applicant falls under the category of 'giving on hire' as per Notification No. 12/2017-Central Tax (Rate), which exempts services by way of giving on hire a motor vehicle meant to carry more than twelve passengers to a state transport undertaking.Findings:- The agreements between the applicant and the state government companies indicate that the service provided is in the nature of renting/hiring of the mode of transport.- The term 'State Transport Undertaking' as defined under Section 2(42) of the Motor Vehicles Act, 1988, includes any corporation or company owned or controlled by the Central Government or one or more State Governments.- The state government companies BCLL, AICTSL, and JCTSL qualify as state transport undertakings.- Therefore, the services provided by the applicant are covered under Entry No. 22 of Notification No. 12/2017-Central Tax (Rate) and are exempt from GST.Issue 2: Rate of Tax if the Services are TaxableSince the services are exempt from GST as per the findings on Issue 1, the question of the applicable rate of tax becomes redundant.Issue 3: Admissibility of Input Tax Credit (ITC)Similarly, the question of the admissibility of ITC is redundant as the services provided are exempt from GST.Conclusion:- The supply of services by the applicant to BCLL, AICTSL, and JCTSL is exempt from GST under Entry No. 22 of Notification No. 12/2017-Central Tax (Rate).- Questions regarding the rate of tax and admissibility of ITC are redundant as the services are exempt.- The ruling is valid subject to the provisions under section 103(2) until declared void under Section 104(1) of the GST Act.