GST Update on 262 transportation of staff by non-ac busses of company

The issue as regards to transportation of staff by non-ac busses by employer company has been a subject matter of discussion since inception of the GST regime. The never-ending debate and litigations on availability of exemption in such cases increase the difficulty levels of the taxpayer manifolds. There had been Advance Ruling on similar lines rendered by Maharashtra AAR in the case of M/S SHAILESH RAMSUNDER PANDE wherein the assessee was having confusion as regards to taxability in case non-AC buses are used for transportation of staff under contract carriage. In the said case, the applicant entered into an agreement with Ratan Indian Power Limited (RIPL) for the aforementioned transaction wherein the buses will be operated strictly as per the instructions of RIPL. It was concluded that since the consideration of service is charged from RIPL and not the passengers, the subject activity falls under “renting of motor vehicles” and therefore, is taxable. Therefore, it was stated that the essential ingredient of contract carriage is that it piles under a contract for fixed set of passengers and does not allow passenger to board at their will. Hence, AAR ruled that the services provided by the applicant falls under renting of motor vehicles under Serial No. 10 of the notification no. 11/2017-CT (Rate) dated 28.06.2017 attracting GST at the rate of 5% without ITC under Reverse Charge Mechanism or 12 % GST with ITC facility under Forward Charge Mechanism. The above advance ruling is in alignment with the recent CBIC Circular No. 177/09/2022-TRU dated 03.08.2022 clarifying the said issue. The analysis of the clarification issued is subject matter of discussion of our present update.

As per serial no. 15(b) of notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “transport of passengers, with or without accompanied belongings, by non-air conditioned contract carriage, other than radio taxi, for transport of passengers, excluding tourism, conducted tour, charter or hire.”
It is clarified that “charter” or “hire” are excluded from the above exemption entry where the renter defined how and when the vehicle will be operated, determining schedules, routes and other operational consideration meaning thereby that the exemption entry would apply in case transportation takes place over pre-determined route and as per pre-determined schedule. Hence, no exemption will be available in case contract carriage is hired for a period of time and the recipient at its discretion is free to decide the manner in which route is decided and schedule is determined. To illustrate, in case a private company arranges transportation facility for its staff wherein the non air conditioned buses are being used as per the directions of the private company, GST will be payable and the exemption will not be available.

It is worth noting that the exemption is only with respect to non-air conditioned contract carriage. If the service provider is engaged in transportation of passengers in air conditioned contract carriage, GST will be payable on the same. Further, another issue can be what will be the consequences in case nominal amount is recovered from the employees for usage of transportation facility in a non-ac conditioned bus. In this respect, the situation is clear wherein no GST shall be attracted in such a scenario due to employer-employee relationship which is excluded from the ambit of Schedule III of CGST Act, 2017 and considering the fact that the transaction is mere perquisite offered by employer and is not service provided in course or furtherance of business.

Aligning with the above, another clarification is also issued by the CBIC in line with recommendation of 47^th GST Council meeting wherein it is clarified that n case of renting of motor vehicle for transportation of passenger which is hired by body corporate for a particular period of time with the directions of operation of the vehicle to be given by body corporate, the said services shall fall under “renting of motor vehicle” and will be covered under RCM wherein the tax shall be paid by the body corporate. On the contrary, if in case the body corporate avails passenger transportation services over pre-determined routes on pre-determined schedules, it will be classifiable under “passenger transport services” liable to GST under forward charge and the body corporate shall not be liable to pay tax under RCM.

The above clarificatory circular will be helpful for the taxpayers in order to avoid existing litigations and confusions in the minds of taxpayers. Circulars like these are anticipated in future as well which will prove to be useful for the taxpayers.

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GST Update on 262 transportation of staff by non-ac busses of company

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