ITC for transportation of employees in bus

[Madhavan iyengar]

A Vehicle operator has a 50 seater bus, and has a contract with a company for pick up and drop of employees of company to factory in the 50 seater bus,

He levies 12% GST can company get ITC on the Charges paid to the vehicle operator. SAC code 996601

issue: ITC eligibility under current law and post amendment 01/02/2019

[DR.MARIAPPAN GOVINDARAJAN]

In my view it is eligible.

[KASTURI SETHI]

I support the view of Dr.Govindarajan, Sir.

I am also of the view that if any supplier of goods or services hires bus or any other motor vehicle carrying more than six passengers for their employees or otherwise, shall not fall under the definition of rent-a-cab u/s. 17(5) and ITC will be allowed on services which fall under HSN 996601.

[Bipin Parmar]

Dear Experts,

17(5)(b)(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

Will it affect the eligibility of ITC on pickup-drop facility provided to employees?

[KASTURI SETHI]

No. It will not effect. Such pick drop of employees is not obligatory for employers.

[Madhavan iyengar]

sirs please see this judgement of haryana aar where they have held that irrespective of the seating capacity vehicles carrying passengers will fall under rent a cab and covered by disallowance u/sec 17(5)

AAR judgement in ref: HAR/HAAR/R/2018-19 = 2019 (2) TMI 1081 - AUTHORITY FOR ADVANCE RULING, HARYANA.

experts pls enlighten

[Bipin Parmar]

Dear Kasturi Sir,

I'm still confused. Section 17(5)(b)(iii) says ITC on travel benefits extended to employees would be available only if it's obligatory for the employer to provide. However here as you said it's not obligatory for the employer to provide such travel benefits. Then how would ITC be available?

Please clarify.

Thanks

Bipin

[KASTURI SETHI]

SH. Madhavan iyengar, JI,

Pl.inform name of the appellant/party in AAR Haryana.

[KASTURI SETHI]

Dive deep into the legal meaning of the word, 'obligatory'. One of the legal meanings is 'statutory binding'. For example; Maintaining safety standards is a statutory requirement . Availing LTC is not a statutory requirement.You can search for more statutory requirements for the employer.

[Madhavan iyengar]

Kasturiji

YKK India Pvt Ltd = 2019 (2) TMI 1081 - AUTHORITY FOR ADVANCE RULING, HARYANA

advance ruling haryana 2018-19/04

[KASTURI SETHI]

In this aspect, AAR Haryana has discussed /covered all the aspects including the issue of 'Obligatory for the employer----------------'. The applicant in this case could not prove that Rent-a-cab was obligatory on the part of employer to provide this service to their employees'.

[Harsha Dattani]

Dear Expert,

We have transport facility for staff from station to office in bus of 50 capacity, our transporter not charging us GST, whether we need to pay RCM @5% and can claim input credit.

Please reply

Harsha

[KASTURI SETHI]

Hiring bus is not under RCM.

[Bharat Sharma]

Hello,

My doubt is that is this ITC availment conflicting with the Schedule 1 of CGST Act ?

If the bus services are provided to Employees free of cost or say nominal amount (not market value) and no GST is charged, which is treated as gift/perquisite to the employees then the ITC on hire of such bus services can be availed ?

AI Summary

Input tax credit eligibility for employee transport hinges on rent-a-cab classification and employer obligation under GST. ITC on employer-hired bus services depends on whether the service is categorised as rent-a-cab disallowance and whether providing transport is obligatory for the employer; experts argue vehicles carrying more than six passengers used for employee transport are not rent-a-cab and thus ITC is allowable, while a contrary advance ruling found such services disallowable absent proof of a statutory obligation. Hiring a bus where GST is not charged ordinarily does not attract reverse charge, and questions persist about perquisite treatment and Schedule I interaction.