2018 (12) TMI 1157 - AAR - GST

Rate of GST - supply of non-air conditioned vehicles on hire to Indian Army - Contract carriage - N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 - Held that - The essential ingredient of a contract carriage is that it plies under a contract for a fixed set of passengers, and does not allow any other passenger to board or alight from the carriage at will - The applicant does not satisfy the condition prescribed in clause (a) nor specified in clause (b) of clause (7) of section 2 of the Motor Vehicles Act, 1988 and accordingly, they cannot be considered as non-air conditioned contract carriage and are hence not eligible for exemption under the serial no. 15 of the exemption notification no. 12/2017 Central Tax (Rate) dated 28.06.2017. Even if the contract is assumed as non-airconditioned contract carriage , even then, serial no. 15 of the exemption notification no. 12/2017 Central Tax (Rate) dated 28.06.2017 does not exempt it from GST, as the hired non-airconditioned contract carriage are excluded from exemption as specifically mentioned in the said notification - the service provided by the applicant falls under rent a cab service. Ruling - The Service provided by the applicant is not exempted under Notification No. 12/2017 dated 28.06.2017 as this Service does not fall under non-airconditioned contract carriage category - The service provided is rent a cab Service, which attracts IGST @ 5% (CGST @ 2.5% and SGST @ 2.5%) provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle) has not been taken or IGST @ 12% (CGST @ 6% and SGST @ 6%) if input tax credit is availed.

Summary

Issues Involved:
1. Applicability of a notification issued under the provisions of the CGST/RGST Act.
2. Determination of the liability to pay tax on non-air conditioned vehicles provided on hire to the Indian Army.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 12/2017-Central Tax (Rate):

The applicant, a registered person under GST, sought an advance ruling on whether the supply of non-air conditioned vehicles on hire to the Indian Army is exempt from GST under serial no. 15 of exemption notification no. 12/2017-Central Tax (Rate) dated 28.06.2017. The applicant argued that the exemption applies to non-air conditioned contract carriages, as defined under the Motor Vehicles Act, 1988.

The notification specifies that the transport of passengers by a non-air conditioned contract carriage, excluding radio taxis, tourism, conducted tours, charter, or hire, is exempt from GST. The applicant contended that their service does not meet the criteria for a 'contract carriage' as per the Motor Vehicles Act, which defines it as a vehicle engaged under a contract for a fixed set of passengers without picking up or setting down passengers en-route.

2. Determination of Tax Liability:

The applicant had been charging GST on all vehicles supplied to the Indian Army, but the Army refused to reimburse GST on non-air conditioned vehicles, claiming exemption under the said notification. The applicant sought clarification on whether their service qualifies for the exemption.

Findings, Analysis, and Conclusion:

Upon review, the authority concluded that the applicant's service does not qualify as a 'non-air conditioned contract carriage' under the Motor Vehicles Act. The essential characteristic of a contract carriage is that it operates under a contract for a specific group of passengers without picking up others en-route. The applicant’s service did not meet these conditions, thus failing to qualify for the exemption.

Furthermore, even if the service were considered a non-air conditioned contract carriage, the exemption notification explicitly excludes hired non-air conditioned contract carriages from exemption. Therefore, the service provided by the applicant falls under the category of 'rent a cab' service.

Ruling:

The service provided by the applicant is not exempt under Notification No. 12/2017 dated 28.06.2017. It is classified as 'rent a cab' service, attracting:
- IGST @ 5% (CGST @ 2.5% and SGST @ 2.5%) without input tax credit, except for input services in the same line of business.
- IGST @ 12% (CGST @ 6% and SGST @ 6%) if input tax credit is availed.

This ruling clarifies that the applicant must charge GST on the supply of non-air conditioned vehicles on hire to the Indian Army, as the service does not qualify for the claimed exemption.