Transportation of Employees, Goods and Services Tax - GST

[Kusalava InternationalLimited]

we are mfg co and provide transportation facility to employee from home to factory and factory to home for that we have purchased bus and given to one person(Unregistered Person) to run bus.For that we are paying every month bill to him.(including Diesel,Driver Salaries and his commission)

1.What is the rate of GST to be charged on Bill if he is registered?Please refer SAC Code.

2.Can we claim ITC on that bill?

Posts / Replies

[Mahadev R]

I wish to agree with Mr.Venkat Raman, Credit restriction should be in relation to motor cab or maxi cab which would cover upto 12 persons. In other cases, credit should be allowed and it would be allowed as gradually credits would become more seamless in future.

[YAGAY and SUN]

Get it clarified from the Law Makers as there are certain words on which no definition is provided in the GST Law.

[Anubhav Bansal]

Dear Venkat Ramanji,

Thanks for sharing the extract of those advertisement. After reading it, I am of the opinion that your conclusion basically is relied upon following extracts of the advertisment "it follows therefrom that supply by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST. "

If this be the case then even the partial recovery form the employee can be said to be a contractual agreement between employer and employee. Then why should this partial recovery from the employees is liable for GST in hands of employer? Reference to the ruling of AAR Kerala bench.

Regards,

Anubhav Bansal

[JAIPRAKASH RUIA]

Very happy to see that experts are discussing the issue and giving their view in a very democratic manner and the level and quality of discussion has improved significantly with this post. I request all the expert involved in this post to be more active and provide the guidance to learner as they are amazing and earned enormous experience in this field.

Reference of Section, rule and circular and press release are just amazing. Let us maintain this quality.

[KASTURI SETHI]

Sh.Jai Prakash Ji,. Thanks for encouraging the experts of this forum.

[Alkesh Jani]

Sir,

In this regards, please allow me to reproduce Section (17)(5) (a) for ready reference:-

(a) motor vehicles and other conveyances except when they are used––

(i) for making the following taxable supplies, namely:-

(A) further supply of such vehicles or conveyances ; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

Based on above, it is clear that law has very specifically conveyed that ITC is available ONLY for taxable supply i.e. (i) further supply of such vehicles, (ii) for transportation of passengers or goods and (iii) imparting training. In my point of view drop and pick up of employee does not fall within this “namely” services. Moreover, supplies to employer to employee has specifically mentioned in Section and schedules, wherever, benefit is to be granted. So only those supplies including gifts, where specifically mentioned is available to employer. So, I am of the view that ITC is not available.

Thanks

[Anil Sood]

Friends let us have a look at the Apportionment & blocked credit:-

17. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

5 Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:

(a) motor vehicles and other conveyances except when they are used––

(i) for making the following taxable supplies, namely:-

(A) further supply of such vehicles or conveyances ; or

(B) transportation of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods;

(b) the following supply of goods or services or both-

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre;

(iii) rent-a-cab, life insurance and health insurance except where––

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(ii) travel benefits extended to employees on vacation such as leave or home travel concession;

Now, if we look at the definition, the credit of motor vehicle is inadmissible except in the case of buses owned by the Employer because the buses are not engaged for providing services of transportation of passengers.

However, if the Employer hires buses from outside and makes payment to the owner of the buses towards transportation of employees, the Input tax credit, in my view is admissible because without transportation of employees, the business cannot go on. Thus the expenditure is in the nature of input service. In the Service Tax regime similar restriction was imposed but where the rent a cab or buses were hired for transportation of employees, credit was available and in case of my clients exporter of services, I got refunds too. Its the analysis of the facts, agreement and thereafter, presentation how you present your case.

 

[JAIPRAKASH RUIA]

I like the below lines. Good !

It's the analysis of the facts, agreement and thereafter, presentation how you present your case.

[Jasbir Uppal]

In my view also with the view of experts as per provision of section 17(5) of CGST, Act, 2017. GST payable @18% ITC is not eligible on provide transportation facility to employee from home to factory and factory to home