2024 (7) TMI 1238 - AAR - GST

ITC on motor vehicle leasing for women employee transportation available when mandated by law from notification date

The AAR TN ruled that ITC on leasing/renting motor vehicles for women employee transportation is available when mandated by law. The applicant can claim ... Input tax credit - blocked credits - proviso to Section 17(5)(b) of the CGST Act - obligatory for an employer to provide - eligibility and conditions under Section 16 of the CGST Act - leasing, renting or hiring of motor vehicles for transportation of persons - CBIC Circular No. 172/04/2022 clarification - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employeesInput tax credit - blocked credits - proviso to Section 17(5)(b) of the CGST Act - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employees - eligibility and conditions under Section 16 of the CGST Act - Eligibility to claim ITC on GST paid for leasing/renting/hiring of motor vehicles provided as transport for safety and security of women employees under Tamil Nadu Shops and Establishments Act, 1947 - HELD THAT: - Section 17(5)(b) ordinarily categorises leasing, renting or hiring of motor vehicles as blocked credit. The proviso to Section 17(5)(b) renders ITC available where the inward supply is obligatory for an employer to provide to employees under any law for the time being in force. The Authority examined the Tamil Nadu notification imposing an obligation on employers to provide transport to women employees working in shifts and the CBIC clarification that the proviso applies to the whole of clause (b). Applying these legal positions, the Authority held that GST paid on leasing/renting/hiring of motor vehicles to provide transport facilities for ensuring safety and security of women employees is eligible as input tax credit, subject to satisfying the general eligibility and conditions prescribed in Section 16 of the CGST Act, 2017. [Paras 6]The applicant is eligible to avail ITC on such motor-vehicle transport services for women employees, subject to Section 16 conditions.Proviso to Section 17(5)(b) of the CGST Act - obligatory for an employer to provide - leasing, renting or hiring of motor vehicles for transportation of persons - eligibility and conditions under Section 16 of the CGST Act - Whether the entire ITC on transportation can be availed for all shifts or only for specified shift timings - HELD THAT: - The proviso makes ITC available only where the supply is obligatory for an employer to provide under any law. The Tamil Nadu notification mandating transport applies to women employees arriving or leaving workplace between 8.00 P.M. and 6.00 A.M. Consequently, the Authority limited ITC to tax paid on motor-vehicle services provided to women employees who arrive or depart during 8.00 P.M. to 6.00 A.M. Any claim for transport in other shifts does not fall within the statutory obligation relied upon and thus does not qualify under the proviso. The availability remains, in all events, subject to meeting Section 16 requirements. [Paras 6]ITC is available only for transport services provided to women employees arriving or leaving between 8.00 P.M. and 6.00 A.M., subject to Section 16.Proviso to Section 17(5)(b) of the CGST Act - CBIC Circular No. 172/04/2022 clarification - Tamil Nadu Shops and Establishments Act obligation to provide transport to women employees - eligibility and conditions under Section 16 of the CGST Act - Temporal scope - the date from which ITC is allowable on such transport services - HELD THAT: - Clause (b) of Section 17(5) was amended with effect from 01.02.2019, but the proviso operates only when the supply is obligatory under a law in force. The Authority examined the dates of Tamil Nadu notifications and found that the obligation was made effective by the State notification dated 28.05.2019. A circular is clarificatory and does not itself create the statutory obligation earlier than the State notification. Therefore, the Authority concluded that ITC in respect of leasing/renting/hiring of motor vehicles for this statutory purpose is available from 28.05.2019 onwards, subject to the conditions of Section 16. [Paras 6]ITC is allowable from 28.05.2019 onwards, subject to Section 16 conditions; claims prior to that date are not supported by the statutory obligation.Final Conclusion: The Authority ruled that GST paid on leasing/renting/hiring of motor vehicles for transporting women employees is eligible as input tax credit where such transport is obligatory under the Tamil Nadu Shops and Establishments Act, 1947, limited to women arriving or leaving between 8.00 P.M. and 6.00 A.M., and that such ITC is available from 28.05.2019 onwards, in each case subject to satisfying the eligibility and conditions of Section 16 of the CGST Act, 2017. Issues Involved:1. Eligibility of Input Tax Credit (ITC) on services of leasing/renting/hiring of motor vehicles for transportation of women employees.2. Availability of ITC for all shifts.3. ITC eligibility for services received from the date of introduction of the proviso to Section 17(5)(b)(iii) of CGST Act, 2017, up to March 2022.Issue-Wise Detailed Analysis:1. Eligibility of ITC on Services for Transportation of Women Employees:The applicant, a company in the ITes sector, provides transportation facilities to women employees as mandated by the Tamil Nadu Shops and Establishments Act, 1947. The applicant sought clarity on the eligibility of ITC on tax paid for leasing/renting/hiring motor vehicles for this purpose. Section 17(5)(b) of the CGST Act, 2017, generally blocks ITC on leasing, renting, or hiring of motor vehicles. However, a proviso allows ITC where it is obligatory for an employer to provide such services under any law. The CBIC Circular No. 172/04/2022 clarified that this proviso applies to the entire clause (b) of Section 17(5). Given the statutory obligation under the Tamil Nadu Act, the applicant is eligible to avail ITC on these services, subject to conditions under Section 16 of the CGST Act, 2017.2. Availability of ITC for All Shifts:The applicant inquired if ITC could be availed for providing transportation facilities in all shifts. The ruling clarified that ITC is available only for services provided to women employees working between 8:00 PM and 6:00 AM, as mandated by the Tamil Nadu Shops and Establishments Act, 1947. The ITC on services for other shifts remains blocked under Section 17(5)(b) of the CGST Act, 2017.3. ITC Eligibility for Services from the Date of Proviso Introduction:The applicant sought to avail ITC from the date of the proviso's introduction on 01.02.2019. The ruling noted that while the proviso was effective from 01.02.2019, the Tamil Nadu Government's notification mandating transportation facilities for women employees was dated 28.05.2019. Therefore, ITC is available from 28.05.2019 onwards, subject to compliance with Section 16 of the CGST Act, 2017. The applicant's argument to avail ITC for periods prior to this date based on procedural grounds was not accepted, as circulars are clarificatory and not legislative.Ruling:1. The applicant is eligible to avail ITC on leasing/renting/hiring of motor vehicles for transportation facilities to ensure the safety and security of women employees as per the Tamil Nadu Shops and Establishments Act, 1947, subject to Section 16 of the CGST Act, 2017.2. ITC is available only for services provided to women employees working between 8:00 PM and 6:00 AM.3. ITC on leasing, renting, or hiring of motor vehicles is available from 28.05.2019 onwards, subject to fulfilling the conditions under Section 16 of the CGST Act, 2017.