Input tax credit allowed on renting vehicles for women employees working beyond 8 PM under Section 17(5)(b) proviso from May 28, 2019.

AAR Tamil Nadu ruled that input tax credit on renting motor vehicles with seating capacity below thirteen persons for transporting women employees working beyond 8 PM is available from 28.05.2019. While CGST Act Section 17(5)(b) generally blocks ITC on such vehicle rentals from 01.02.2019, the proviso allows ITC where employer is legally obligated to provide transport. Since Tamil Nadu Shops and Establishment Act, 1947 mandates transport for women employees working late hours, and state notification was issued on 28.05.2019, ITC is permissible from that date onwards.

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Issues Involved:

1. Eligibility of Input Tax Credit (ITC) on tax paid for leasing/renting/hiring of motor vehicles for transporting women employees.
2. Applicability of ITC from the date of introduction of the proviso to Section 17(5)(b)(iii) of the CGST Act, 2017.

Summary:

Issue 1: Eligibility of ITC on tax paid for leasing/renting/hiring of motor vehicles for transporting women employees

The Applicant, M/s Access Healthcare Services Private Limited, sought an advance ruling on whether the tax paid on input services for leasing/renting/hiring of motor vehicles to provide transportation facilities to women employees is eligible for Input Tax Credit (ITC). The Applicant operates in shifts to cater to customers outside India and provides transportation facilities to women employees as mandated by the Tamilnadu Shops and Establishment Act, 1947. The Act requires employers to provide transportation for women employees working between 8.00 PM and 6.00 AM for their safety.

The Applicant argued that the GST paid on such transportation services should be eligible for ITC, citing the amended Section 17(5) of the CGST Act, 2017, which allows ITC on goods or services that are obligatory for an employer to provide under any law. The Applicant referenced Circular No. 172/04/2022 and previous rulings supporting their claim.

The Authority examined the facts and supporting documents, including agreements and invoices from service providers indicating the use of motor vehicles with seating capacities of less than 13 persons. It was noted that Section 17(5) blocks ITC on motor vehicles used for passenger transport with seating capacities of less than 13 persons, except when obligatory under law.

Issue 2: Applicability of ITC from the date of introduction of the proviso to Section 17(5)(b)(iii) of the CGST Act, 2017

The Authority found that the Applicant is mandated to provide transportation facilities to women employees working beyond 8.00 PM as per the Tamilnadu Shops and Establishment Act, 1947, effective from the Notification dated 28.05.2019. Therefore, ITC is not blocked on renting motor vehicles for this purpose from 28.05.2019.

Ruling:

1. The Applicant is entitled to avail ITC on the tax paid towards leasing/renting/hiring of motor vehicles for providing transport facilities to women employees alone, who are arriving or leaving the workplace between 8.00 PM to 6.00 AM.
2. ITC can be availed with effect from 28.05.2019, subject to the provisions of Section 16 of the CGST/TNGST Act, 2017.

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