2019 (2) TMI 1081 - AAR - GST

Input tax credit - GST charged by the Contractor for hiring of buses for transportation of employees - GST charged by the Contractor for hiring of cars for transportation of employees - restriction on Rent a Cab service specified in Section 17(5)(b)(iii) - Held that - The phrase rent-a-cab has not been defined in the CGST/HGST Act, 2017. In situations where statutory meaning of any term/phrase has not been provided words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances. Where any commercial vehicle is hired for transportation of passengers, it would be squarely covered by the phrase rent-a-cab In other words, any person who provides motor vehicle designed to carry passengers , on rent, would be included. This also implies that it includes renting of motor cars, motor cabs, maxi cabs, mini buses, buses and all other motor vehicles which are designed to carry passengers, irrespective of their capacity to carry passengers. The contentions of the applicant that hiring of buses which can carry large number of passengers would not qualify under rent-a-cab is found to be untenable and the activitiy of the contractor in the instant case, providing buses or cars on hire to the applicant, is specifically covered under the meaning of rent-a-cab , which makes the impugned supply as ineligible for ITC in terms of Section 17(5) of the CGST/HGST Act, 2017. It clearly stands established that the services of the Contractor for hiring of buses/cars for transportation of employees qualify as rent-a-cab services. Further, it is also observed that nothing has been brought on record to suggest that the impugned service is not a service which is obligatory for an employer to provide to its employees under any law for the time being in force; or that such inward supply of services is being is used by the applicant for making an outward taxable supply of the same category of services or as part of a taxable composite or mixed supply. The applicant is not eligible for input tax credit of GST charged by the Contractor for hiring of buses/cars for transportation of employees.

Summary

Issues Involved:
1. Eligibility of input tax credit (ITC) on GST charged for hiring buses for employee transportation.
2. Eligibility of ITC on GST charged for hiring cars for employee transportation.
3. Applicability of the restriction on 'Rent-a-Cab' services under Section 17(5)(b)(iii) of the CGST/HGST Act, 2017.

Issue-wise Detailed Analysis:

1. Eligibility of Input Tax Credit on GST Charged for Hiring Buses for Employee Transportation:

The applicant, M/s. YKK India Private Limited, engaged in manufacturing slide fasteners and other products, hires buses to transport employees to its factories located in remote areas. The applicant pays GST on the transportation services provided by contractors and seeks to claim ITC on this GST.

The Authority examined the relevant provisions, particularly Section 16 of the CGST/HGST Act, 2017, which allows registered persons to claim ITC on supplies used in the course or furtherance of business. However, Section 17(5) lists exceptions where ITC is not allowed, including 'rent-a-cab' services.

The Authority analyzed the term "rent-a-cab" using various dictionary definitions and concluded that it includes hiring any motor vehicle designed to carry passengers, including buses. Therefore, the hiring of buses for employee transportation falls under the 'rent-a-cab' category, making the GST paid on such services ineligible for ITC under Section 17(5)(b)(iii).

2. Eligibility of Input Tax Credit on GST Charged for Hiring Cars for Employee Transportation:

Similar to the buses, the applicant also hires cars for employee transportation and pays GST on these services. The applicant contends that these services should not be classified as 'rent-a-cab' since they do not take control of the vehicles, which remain with the contractor.

The Authority reiterated its analysis of the term "rent-a-cab" and confirmed that it includes hiring cars for passenger transportation. Thus, the GST paid on hiring cars for employee transportation also falls under the 'rent-a-cab' category, making it ineligible for ITC under Section 17(5)(b)(iii).

3. Applicability of the Restriction on 'Rent-a-Cab' Services Under Section 17(5)(b)(iii):

The Authority examined whether the restriction on 'rent-a-cab' services applies to the applicant's case. The applicant argued that the services obtained do not fall under 'rent-a-cab' since they do not take control of the vehicles, and the vehicles remain with the contractor.

However, the Authority referred to the definitions and judicial precedents, including the case of Commissioner of Service Tax Vs. Vijay Travels, which clarified that 'renting' and 'hiring' are synonymous. The Authority concluded that the services provided by the contractor, whether buses or cars, qualify as 'rent-a-cab' services.

The Authority also noted that there was no evidence to suggest that the transportation services were obligatory for the employer to provide under any law or that the services were used to make an outward taxable supply of the same category.

Conclusion:

The Authority ruled that the applicant is not eligible to claim ITC on the GST charged by the contractor for hiring buses and cars for employee transportation. The restriction on 'rent-a-cab' services specified in Section 17(5)(b)(iii) applies to both cases, making the GST paid on these services ineligible for ITC.

Advance Ruling:

1. The applicant is not eligible to take ITC on:
a. GST charged for hiring buses for employee transportation.
b. GST charged for hiring cars for employee transportation.

2. The restriction on 'Rent-a-Cab' services specified in Section 17(5)(b)(iii) is applicable to ITC on:
a. GST charged for hiring buses for employee transportation.
b. GST charged for hiring cars for employee transportation.

Decided accordingly.