Rent a cab service w.e.f 01.02.2019

[Mohideen A]

Whether the input credit paid on taking cabs on hire for the transportation of its employees by companies is eligible for ITC in the Company's hands w.e.f. 01.02.2019? since the word rent a cab is removed from Blocked credit u/s 17(5) in the CGST amendment act 2018 ? Kindly clarify

[Surabhi Parihar]

With the introduction of new provisions w.e.f. 01/02/19, ITC on renting, leasing and hiring of motor vehicles have been disallowed only for vehicles having capacity upto 13 seats. (Section 17(5)(b)(i))

Thus, ITC can be availed on service of leasing, renting or hiring of motor vehicles under the following conditions w.e.f. 01/02/19:

– The Vehicle has approved seating capacity of more than 13 persons (including driver).

– The service of leasing, renting or hiring is used for furtherance of business as per Section 16(1)

– The service provider furnishes invoice as per Section 31 and Rule 46

Therefore, ITC can be availed if it is obligatory for an employer to provide the same to its employees under any law for the time being in force and is used in furtherance of business.

[KASTURI SETHI]

Conditional ITC is allowed. Conditions well explained by an expert.

[YAGAY andSUN]

Motor Vehicle with More Than 13 Seaters is Eligible for ITC

1. Motor Vehicle with more than 13 persons including driving is eligible for ITC if it has approved seating capacity.
2. Physical verification of motor vehicle can be done to confirm the number of available seats
3. For such a vehicle, the verification of the approved seating capacity will be based on RC-smart card (registration certificate)

[Ganeshan Kalyani]

I agree with the experts. However, I am of the view that ITC may be denied.

AI Summary

Input tax credit on cab hire allowed where vehicle seating exceeds the permitted limit and hire is for business use. ITC on hiring or renting motor vehicles is available only for vehicles whose approved seating capacity exceeds the specified passenger threshold and when the service is used in the furtherance of business; claimants must obtain proper invoices from the supplier and may verify seating capacity via the registration certificate or physical inspection. Employer obligations under law to provide transport and use of the service for business purposes further support eligibility, subject to the statutory compliance requirements.