2020 (6) TMI 519 - AAR - GST

Input Tax Credit - GST paid by the contractor on the services rendered to the applicant - rate of GST - HELD THAT - The availability of ITC as per the provision of second proviso to section 17(5)(b) is available only on the condition that such goods or service or both is obligatory for an employer to provide to its employees under any law for the time being in force. Since, the applicant has not been able to cite any law under which the service of providing the facility of transportation to his employees is obligatory under any law, therefore ITC will not be available to him. The applicable rate of tax on renting of Cabs as per Notification No. 20/2017 dated 22.08.2017 is 5% with limited ITC (of input services in the same line of business) and 12% with full ITC - If the facility provided by a taxpayer for transportation of employees is not obligator under any law, for the time being in force then no ITC will be available to such a taxpayer. The applicant will however be eligible to claim ITC for the service supplied at 12% GST Rate if the conditions laid down in the second proviso to section 17 (5)(b) are satisfied.

Summary

Issues:
Availability of input tax credit on services availed for various purposes through contractors and applicable GST rate.

Analysis:

Input Tax Credit Eligibility:
The applicant, a public service broadcaster, sought clarification on availing input tax credit (ITC) on services provided by contractors for purposes like transporting employees and other related activities. The Authority reviewed the application and noted that the applicant had entered into agreements for hiring vehicles for employee transportation. The eligibility of ITC is governed by Section 16 of the CGST/HPGST Act, 2017, which allows credit on goods or services used in the course of business. However, Section 17(5) lists exceptions where ITC is not available, including services like transportation of persons. The second proviso to Section 17(5)(b) specifies that ITC is available only if the service is obligatory under any law. As the applicant failed to demonstrate any legal obligation for providing transportation services to employees, the Authority ruled that ITC would not be available in this case.

GST Rate Applicability:
Regarding the applicable GST rate on renting of cabs, the Authority referred to Notification No. 20/2017 and Circular No. 130/49/2019-GST. The notification outlines two rates: 5% with limited ITC and 12% with full ITC for transporting passengers by motor cabs where fuel cost is included in the consideration. The ruling specified that the taxpayer could claim ITC at 12% GST rate only if the conditions stipulated in the second proviso to Section 17(5)(b) were met. Therefore, the applicable rate of tax on renting cabs was determined based on the specific circumstances and compliance with the relevant provisions.

In conclusion, the judgment clarified the eligibility criteria for claiming input tax credit on services provided through contractors and determined the GST rate applicable to the renting of cabs based on the specific conditions outlined in the relevant legal provisions.