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 ITC only for transport services provided to women employees working between 8 PM to 6 AM shifts, as required under Tamil Nadu Shops and Establishments Act notification dated 02.06.2022. ITC eligibility commences from 28.05.2019 when the state notification made such transport obligatory, not from the CGST Act amendment date. The ruling clarifies that CBIC circular 172/04/2022 merely provided clarification on existing provisions and doesn't extend retrospective benefits on procedural grounds.

---

---

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.

---