ITC eligibility on Transportation Facility to Employees – AAR Maharashtra
by ReinHeads Team | Sep 15, 2020
AAR Maharashtra* – ITC eligibility on Transportation Facility to Employees
| Facts |
- Tata Motors Limited (‘the Applicant’) is engaged in manufacturing commercial and passenger vehicles
- The Applicant has engaged a Service Provider (‘the SP’) to provide transportation facility to its employees in non-air conditioned buses having seating capacity of more than 13 passengers for commuting to/ from workplace
- In lieu of transportation facilities provided to employees, nominal amount is recovered from the employees on a monthly basis. Thus, difference between the amount paid to the SP and amount recovered from employees is a cost to the Applicant
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| Issue before the AAR |
- Whether Input Tax Credit (‘ITC’) is available to the Applicant on GST charged by the SP on hiring of bus/ motor vehicle for transportation of employees to and from workplace? If yes, whether it will be restricted to the extent of cost borne by the Applicant?
- Whether GST is applicable on nominal amount recovered by the Applicant from employees for usage of bus transportation facility in a non-air conditioned bus?
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| Discussion and Findings of the AAR |
- Transportation services received by the Applicant are used in the course or furtherance of their business and therefore prima facie, they are eligible to take ITC of GST charged by the SP
- Section 17(5) of the CGST Act 2017 (‘the Act’) has been amended with effect from 01.02.2019 vide Notification No. 02/2019 (Central Tax) dated 29.01.2019 whereby ITC has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having approved seating capacity of more than 13 persons (including the driver). Prior to the amendment, ITC was restricted on motor vehicles or conveyances used in transport of passengers
- As per clause 1 of the Schedule-III appended to the Act, services by an employee to the employer in the course of or in relation to his employment shall be treated neither as a supply of goods nor a supply of services
- Due to “Employer-Employee” relationship, transaction between the Applicant and their employees is not a supply under the Act
- Since the Applicant is not supplying any services to its employees, in view of Schedule III, GST is not applicable on the nominal amounts recovered from the employees in the subject case
- The Applicant’s contention of GST exemption under Sl. No. 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 in respect of nominal amounts of recoveries made from their employees is not correct since there is no supply involved
- Basis the above discussions, the following ruling has been passed by the Authorities on the issues mentioned above:
- ITC is available to the Applicant but only after 01.02.2019
- ITC is not admissible to the Applicant on part of cost borne by employee and thus ITC will be restricted to the extent of cost borne by the Applicant in light of the Hon’ble High court of Bombay ruling in the case of CCE, Nagpur vs Ultratech Cements Ltd [2010 (260) ELT 369 (Bom)]
- GST is not applicable on nominal amount recovered by the Applicant from employees for usage of employee bus transportation facility in non-air conditioned bus
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*Advance Ruling No. 23/2019-20/B-46 dated 25 August 2020 (The Authority for Advance Ruling, Maharashtra)
