ITC on Hiring of motor vehicle

[Kumar Kedia]

Sir,

A company is engaged in providing helicopter transportation services to the customer. The company has the contract with travel operator and whenever any employee uses the cab services, the travel operator raises the bill to company on which company deducts TDS. Can he avail credit on hiring of motor vehicle for the transportation of employees. Can it be said that it is providing the same category of service?

[Rajagopalan Ranganathan]

Sir,

According to Section 17 (5) (a) of CGST Act, 2017, "input tax credit shall not be available in respect of the following, namely :-

(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely :-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles.

Your employee cannot be treated as passenger. Hence ITC cannot be availed by you on hiring of motor vehicle for the transportation of employees.

[Ganeshan Kalyani]

Rent-a-car service is under negative list. ITC is not allowed.

[KASTURI SETHI]

Mr.Kumar Kedia,

I agree with both experts. I think your query remains unanswered.

Q. Can it be said that it is providing the same category of service ?

Ans. It is not in the same line of business. See all replies against Issue ID No. 115542 dated 18.10.19.

AI Summary

Input tax credit restriction on motor vehicles bars credit for hired cabs used to transport employees, absent passenger-transport supply. Section 17(5)(a) bars input tax credit on motor vehicles for transporting persons with approved seating capacity up to thirteen, except when used for further supply, transportation of passengers, or driving training. Hiring vehicles to transport a company's employees does not meet these exceptions because employees are not treated as passengers for this purpose; therefore, input tax credit on such hires is not available. Rent-a-car services are also identified as excluded from ITC under the negative list.