A.C. car hiring services to Municipal Corporation during Covid-19 not exempt from GST under Notification 12/2017

The Gujarat AAR ruled that A.C. car hiring services provided to Ahmedabad Municipal Corporation for administrative purposes during Covid-19 do not qualify for GST exemption under Notification No.12/2017, as the services were not for public healthcare work listed in the Twelfth Schedule relating to municipal functions under Article 243W. The applicant is liable for GST as the Municipal Corporation deducted TDS treating the service as taxable. However, the applicant is eligible for Input Tax Credit on services received from same line of business entities, subject to conditions under Notification No.11/2017-CT.

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Issues Involved:
1. Classification of service under Sr. No. 6 (Public Health) of Twelfth Schedule of Article 243W of the Constitution.
2. Eligibility for exemption under Sr. No. 3 of Notification No. 12/2017 (Central Tax Rate).
3. Required documentary evidences or declarations for ensuring exclusive use for public health purposes.
4. Eligibility of Input Tax Credit (ITC) for the service provider.
5. Exemption status of direct input services received from the same line of business.

Issue-wise Detailed Analysis:

1. Classification under Sr. No. 6 (Public Health):
The applicant, M/s Varun Travel, provides car rental services to Ahmedabad Municipal Corporation (AMC) for transporting health department teams during emergencies, including the probable third wave of COVID-19. The applicant argued that these services fall under Sr. No. 6 of the Twelfth Schedule of Article 243W of the Constitution, which includes "Public Health, sanitation, conservancy, and solid waste management." However, the Authority for Advance Ruling (AAR) concluded that the services do not fall under Sr. No. 6 because the work order also mentions "other emergency needs and important works," which are not specifically defined as public health functions.

2. Eligibility for Exemption under Sr. No. 3 of Notification No. 12/2017:
The applicant claimed that the services provided to AMC should be exempt from GST under Sr. No. 3 of Notification No. 12/2017 (Central Tax Rate), which exempts pure services provided to the government or local authorities related to functions entrusted to a municipality under Article 243W. The AAR found that the services provided do not exclusively relate to public health functions listed under Article 243W and the Twelfth Schedule. Therefore, the services do not qualify for the exemption.

3. Required Documentary Evidences or Declarations:
The applicant sought guidance on the necessary documentary evidence to ensure the cars are used exclusively for public health purposes. The AAR stated that this question does not fall under the purview of Section 97(2) of the CGST Act, which outlines the scope of advance rulings. Therefore, the AAR did not provide a ruling on this issue.

4. Eligibility of Input Tax Credit (ITC):
The applicant inquired whether they are entitled to claim ITC on services received from the same line of business. The AAR referred to Section 17(5) of the CGST Act and Notification No. 11/2017-CT (Rate), which allows ITC on input services used for making an outward taxable supply of the same category. The AAR concluded that the applicant is eligible to claim ITC on services received from the same line of business, subject to the conditions specified in the notification.

5. Exemption Status of Direct Input Services:
The applicant asked whether direct input services received from the same line of business are also exempt. The AAR noted that this question pertains to the supply of services by a third party to the applicant, not the applicant's own supply of services. As per Section 95 of the CGST Act, the AAR can only pronounce rulings related to the supply of goods or services undertaken by the applicant. Therefore, this question was deemed not maintainable.

Ruling Summary:
1. The service of renting motor vehicles to AMC does not fall under Sr. No. 6 (Public Health) of the Twelfth Schedule of Article 243W of the Constitution.
2. The service does not qualify for exemption under entry No. 3 of Notification No. 12/2017-CT (Rate).
3. The question regarding required documentary evidence is not maintainable.
4. The applicant is eligible to claim ITC on receipt of services from the same line of business, subject to specified conditions.
5. The question regarding the exemption status of direct input services is not maintainable.

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