Whether the applicant is eligible to take input tax credit on GST charged by the contractor for hiring of buses and cars for transportation of employees?

PJ/Case Law/2018-2019/3518

Case:  YKK India Private limited
Citation:  HAR/HAAR/R/2018-19/04 dated 10.07.2018
Issue:   Whether the applicant is eligible to take input tax credit on GST charged by the contractor for hiring of buses and cars for transportation of employees?
Brief facts: M/s YKK India Private limited is holder of GST Registration No. 06AAACY0201G1ZZ and engaged in the business of supply of slide fasteners, chains, and sliders. The applicant uses various goods as well as services on which applicable GST is paid to supplier. The employees of the applicant are engaged in manufacturing the final product in factories which are situated in Haryana where public transport is very minimal. For carrying out its business efficiently, the applicant enters into a contract with the suppliers for hiring buses as well as cars on contractual basis.
Appellant’s contention:   The Appellant has submitted that he has engaged various contractual service provider who provide transportation services and ensure that employees of the assessee are able to reach the factories in time for doing their day to day work as scheduled. The Appellant has entered into contract with the said suppliers for hiring buses as well as cars.
GST invoices comprises Central GST and SGST by classifying the activities under HSN 996413 viz. Non- schedule local bus and coach charter services, attracting GST @ 18%. The applicant is of the view that the payment made by the applicant on GST invoices falls within the meaning of input tax credit under section 2(63) of the CGST Act, 2017. Appellant is eligible to take credit of GST. The applicant also explained that appellant does not take control of the vehicles and that remain under the control of contractor therefore the services obtained by the applicant do not fall under “rent a cab” services.
Respondent’s Contention and Reasoning of judgement:  The applicant is registered taxpayer and as per section 16 of the CGST / HGST Act, 2017, every registered person shall be entitled to take credit of input tax charged on any supply of goods or services which are used in course or furtherance of his business. However, on this availment of ITC, there are certain exceptions prescribed under section 17(5) of CGST/SGST ACT, 2017. As per section 17(5)(b)(iii) ITC shall not available in respect of Rent-a-cab. In this regard, it was observed that the phrase “rent-a-cab” has not been defined in the CGST/SGST Act, 2017. In common parlance, cab refers to a vehicle which has been taken on hire/rent, along with driver, for going from one place to another.  In view of the above, it clearly stands established that the services of the contractor for hiring of buses/cars for transportation of employees qualifies “Rent-a-cab” services  accordingly, the applicant is not eligible to take input tax credit on the same.
Decision: - Ruling is against the assessee.
Comment: - Motor Cab definition has not been specifically defined in the GST Act. The Authority has considered the general definition of the cab referring the Wikipedia and oxford dictionary meaning while proclaiming the decision. Instead of referring the general meaning, motor cab definition should be cited from Motor Vehicles Act, 1988 which clearly defines that “motorcab means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward;” Section 17(5) (b) (iii) specifically blocks credit on renting of cab and buses don’t fall within this definition as per Section 2(25) of the Motor Vehicles Act, 1988. Therefore, this decision is clearly against the law and ITC in respect of renting of buses is allowed.

Prepared by:- Meenal Soni

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PJ/Case Law/2018-2019/3518

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