ITC eligibility on hiring of Cars and Buses for transportation of employees – AAAR, Haryana
by ReinHeads Team | Feb 26, 2020
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ITC eligibility on hiring of Cars and Buses for transportation of employees – AAAR, Haryana
| Facts |
| · YKK India Private Limited (‘the Appellant’) has factories in various remote locations and engaged various contractual service providers (‘the Contractors’) for provision of transportation services to their employees (by way of buses and cars with trained personnel viz. driver and helper) at a fixed monthly fee
· The Appellant filed an Advance Ruling application wherein the Advance Ruling Authority held that:
ü No input tax credit (‘ITC’) would be admissible for GST charged by the Contractors for hiring of buses and cars
ü Restriction of ‘rent-a-cab’ under section 17(5)(b)(iii) (‘the rent-a-cab restriction’) of the CGST Act 2017 is applicable on such ITC
· The said Ruling was challenged by the Appellant before the Appellate Authority for Advance Ruling, Haryana |
| Issues before the Appellant Authority for Advance Ruling (‘the AAAR’) |
| 1. Whether the Appellant is eligible to take ITC on GST charged by the Contractor for hiring of buses and cars?
2. Whether the rent-a-cab restriction is applicable on such ITC?
| Contentions of the Appellant |
· As per the Motor Vehicle Act 1988 (‘the MV Act’), renting involves transfer of possession and control of vehicle to the renter which is absent in hiring. The Appellant has not rented buses and cars, rather hired them as possession of the vehicles remains with the Contractor
· As per the MV Act, the two categories i.e., ‘cabs’ and ‘buses’ are distinct and the rent-a-cab restriction is applicable only to ‘cabs’. The buses hired by the Appellant carry more than 13 passengers and can not be covered by ‘cab’ |
| Discussion & Ruling |
- Any commercial vehicle such as motor cabs, maxi cabs, mini buses, buses, etc. designed to carry passengers which are hired for transportation of passengers would be covered by the phrase ‘rent-a-cab’. Hence, provision of buses or cars on hire for transportation of passengers gets covered under the term ‘rent-a-cab’
- Taxing statute doesn’t make any distinction between renting or hiring, irrespective of possession and control of the vehicle. Thus, the contention that hiring is different from renting is untenable
- Section 17(5) of the CGST Act 2017 has been amended with effect from 30th August 2018 which allows ITC in respect of hiring of motor vehicles having approved seating capacity of more than 13 passengers
- In respect of ITC availment, the ruling of the AAAR is summarized as under:
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ITC eligibility |
Rent-a-cab restriction applicability |
| Pre-Amendment
Prior to 30th August 2018 |
Bus: Not admissible
Car: Not admissible |
Bus: Applicable
Car: Applicable |
| Post-Amendment
Post 30th August 2018 |
Bus: Eligible (since seating capacity of more than 13 passengers)
Car: Not admissible |
Bus: Not applicable (since seating capacity of more than 13 passengers)
Car: Applicable |
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