2025 (12) TMI 548 - AAR - GST

GTA allowed full ITC on biodiesel fuel for goods carriages under Section 16, not blocked by Section 17(5)

AAR (Gujarat) held that the applicant, being a GTA, is entitled to avail full ITC on bio-diesel used as fuel in its goods carriages when discharging GST ... Eligibility to claim full ITC including on bio-diesel fuel - payment of GST @ 12% under forward charge on GTA services under N/N. 20/2017-Central Tax (R) dated 22.08.2017 read with N/N. 13/2017-Central tax (R) dtd. 28.06.2017 - HELD THAT:- The applicant is a Goods Transport Agency (GTA) and input in question is a fuel namely bio-diesel, which the applicant wished to utilise in its trucks for its operations for supply of outward service. As per Section 16(1) ibid, a registered person is eligible to avail credit of the input tax charged on any supply of FOR goods or services or both to him, which are used or intended to be used in the course of furtherance of his business. In this case, the applicant intends to use the bio-diesel as fuel for his operations and therefore is used in the furtherance of business. This brings to the next step as to whether the said input is blocked under Section 17(5) ibid, as even if the input in question is used for furtherance of business but if it is barred under the provisions of Section 17 (5), then the same would not be eligible for ITC. It is found that the bar provided in Section 17(5) is only in case of passenger vehicles and not to goods carriage. Therefore, the applicant is eligible for availing the Input tax credit paid in respect of Bio-diesel used in their operations when they pay GST under forward charge, subject to the condition that they fulfil the other conditions which are prescribed in Section 16 of the CGST Act, 2017 as well as the conditions of N/N. 11/2017-CT(R) dtd. 22.08.2017, as amended. The applicant can pay GST @ 12% (18% w.e.f. 22.09.2025) under forward charge on GTA services under N/N. 11/2017-Central Tax (R) dated 22.06.2017, as amended, read with N/N. 13/2017-Central tax (R) dtd. 28.06.2017 and claim full ITC including on bio-diesel fuel. This is subject to the condition that they fulfil the other conditions which are prescribed in Section 16 and Section 17 of the CGST Act, 2017 as well as the conditions of N/N. 11/2017-CT(R) dtd. 22.08.2017, as amended. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether a goods transport agency that has exercised the statutory option to pay tax under forward charge can discharge GST at the notified rate on its GTA services under the relevant rate and reverse charge notifications. (2) Whether such goods transport agency, paying GST under forward charge, is entitled to avail full input tax credit on inputs including renewable hydrocarbon bio-diesel (Mileage Diesel) used as fuel in goods carriages, having regard to Sections 16 and 17(5) of the CGST Act and the conditions under the applicable rate notification. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Option for GTA to pay GST under forward charge at notified rate Legal framework: The Court examined Notification No. 11/2017-Central Tax (Rate), as amended (rate notification), particularly Entry 9(iii)(b) relating to 'Services of Goods Transport Agency (GTA) in relation to transportation of goods', and the mechanism of option-declaration in Annexure V and reversion via Annexure VI. It also referred to Notification No. 13/2017-Central Tax (Rate), as amended (reverse charge notification), governing when GTA services are taxable under reverse charge, i.e., where the GTA does not exercise the option to pay tax itself. Interpretation and reasoning: The Court noted that Entry 9(iii)(b) specifically permits a GTA to exercise an option to itself pay GST on the services supplied by it, by filing a declaration in Annexure V within the prescribed time window (1st January to 31st March of the preceding financial year, with special timelines for certain years and for new registrants). Once exercised, the option continues for subsequent financial years until the GTA files Annexure VI to revert to reverse charge. Within this option, two effective rate positions exist: (a) payment of GST at 5% where no input tax credit on goods and services used in supplying the GTA service is availed; or (b) payment of GST at 18% where credit is availed. The Court recorded that the applicant had filed Annexure V on 09.03.2023 opting for forward charge for FY 2023-24 and was charging GST at 12% earlier and 18% with effect from 22.09.2025, in line with the applicable rate structure under the notification as amended. Conclusions: The Court held that, having validly exercised the option under Entry 9(iii)(b) of Notification No. 11/2017-Central Tax (Rate) to pay tax under forward charge and complied with the Annexure V procedure, the GTA is entitled to discharge GST on its services at the applicable notified rate (12% prior to 22.09.2025 and 18% thereafter), subject to the conditions in the notification. Issue (2): Entitlement to input tax credit on bio-diesel fuel used in trucks by GTA paying tax under forward charge Legal framework: The Court considered Sections 16 and 17 of the CGST Act, 2017. Section 16(1) entitles every registered person, subject to prescribed conditions and restrictions, to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. Section 16(2)-(4) lay down conditions for availing ITC (possession of tax invoice, receipt of goods or services, tax payment to Government, filing of returns, non-claim of depreciation on tax component, and time limits). Section 17(5) sets out 'blocked credits', including restrictions linked to motor vehicles for transport of persons, but does not similarly block credit in relation to goods carriages. The Court also linked this to the conditions in Entry 9(iii)(b) of Notification No. 11/2017-Central Tax (Rate), which distinguish between the concessional rate without ITC and the standard rate with ITC. Interpretation and reasoning: The Court found as a fact that the applicant is a GTA and that the input in question-renewable hydrocarbon bio-diesel (Mileage Diesel)-is used directly as fuel in trucks employed for providing taxable GTA services. It held that such fuel is clearly used 'in the course or furtherance' of the GTA business within the meaning of Section 16(1), thereby satisfying the basic eligibility criterion for ITC. The Court then examined Section 17(5) to determine whether the fuel-related credit is blocked. It concluded that the statutory bar under Section 17(5) applies only with respect to motor vehicles for transport of persons and related goods/services, and not to goods carriages used for transportation of goods. Consequently, use of bio-diesel in goods carriage vehicles is not covered by any blocking provision. Accordingly, where the GTA has opted to pay tax under forward charge at the higher rate (18%), the notification scheme does not prohibit availing ITC on such fuel inputs, and the statutory provisions under Sections 16 and 17 do not block this credit. Conclusions: The Court held that a GTA which has opted, under Entry 9(iii)(b) of Notification No. 11/2017-Central Tax (Rate), to pay GST on its services under forward charge at the applicable rate (12% prior to 22.09.2025 and 18% thereafter) is entitled to avail full input tax credit on bio-diesel used as fuel in its goods carriages. Such credit is admissible as the fuel is used in the course or furtherance of business and is not blocked under Section 17(5). This entitlement is subject to fulfilment of all other statutory conditions for ITC under Section 16 of the CGST Act and the specific conditions stipulated in Notification No. 11/2017-Central Tax (Rate), as amended.