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

Helicopter service company cannot claim input tax credit for hiring vehicles for employee transport under Section 17(5)(a). A company providing helicopter transportation services inquired about availing input tax credit (ITC) for hiring motor vehicles for employee transportation. The responses clarified that under Section 17(5)(a) of the CGST Act, 2017, ITC is not available for motor vehicles used for transporting employees, as employees are not considered passengers. Additionally, rent-a-car services are on the negative list, further disallowing ITC. It was concluded that the company's services do not fall under the same category as the hired motor vehicle services, thus ITC cannot be claimed.