2019 (4) TMI 150

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....ly used for the said business and the same are not Interchanged with those in respect of leasing business at any point of time until their disposal. The motor vehicles purchased for the above business is capitalized in the books of accounts. The petitioner requested advance ruling on the eligibility to take credit of the input tax credit as defined in Section 2(g) of the GST (Compensation to States) Act, 2017 of the cess paid on purchase of motor vehicles used in providing services of transportation of passengers or renting of motor vehicles given the fact that as a matter of business policy, the said motor vehicles would be initially used for supply of RAC services and disposed of after three or four years of such use. The authorized rep....

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.... 11/2017 Central Tax (Rate} dated 28-06-2017. The renting services are not liable for Compensation Cess under the Compensation Cess Act as per Notification No.2/2017 - Compensation Cess (Rate) dated 28-06-2017. Accordingly, the applicant is availing ITC of GST component only and not that of Compensation Cess paid at the time of purchase of the Motor Vehicles. This is because at this stage there is no liability of Compensation Cess on the outward supplies of renting services and further Compensation Cess can be utilized only for payment of such Cess in terms of the proviso to Section 11 of the Compensation Cess Act. In order to provide the superior customer services, the applicant substitute new vehicles once in three to four years. The app....

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....ctively assigned to them in those Acts. There is no definition of 'exempt supply' under the Compensation Cess Act. Therefore. the same needs to be borrowed from the CGST Act which is as follows: Section 2(47) "exempt supply" means supply of any goods or services or both which attracts nit rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services Tax Act, and Includes non-taxable supply; Accordingly Compensation Cess is not chargeable on rental service, being an exempted supply. The vehicles used for rental business service are generally sold after three - four years of purchase. Therefore. the sale of vehicles being taxable supply. Compensation Cess will be attracted as th....

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....hall be added to output tax liability along with applicable interest till the time such vehicles are used for exempted supplies. Hence, considering provision envisaged in Sec. 17(2) of the CGST Act / SGST Act read with Sec. 11 of the Compensation Cess Act, the petitioner is eligible to take ITC of compensation Cess paid on purchase of vehicles used for rental business and subsequently, used for effecting taxable supply by way of sale on such vehicles. In view of the observations stated above, the following rulings are issued: Whether the applicant is eligible to take credit of the input tax credit as defined in Sec.2(g) of the GST (Compensation to States) Act, 2017 of the Cess paid on purchase of motor vehicles used in providing services....