News & Updates

No ITC on transportation of employees which is not obligatory under Law

May 24, 2020

Facts

  • Prasar Bharti Broadcasting Corpn. of India is a public service broadcaster
  • The taxpayer avails services of hiring taxis for different purposes as mentioned below:-
    • To pick up/ drop shi duty-staff in odd hours.
    • This facility is being provided in odd hours to lady-employees, handicapped & general employees.
    • Taxis are hired for tour/OB recordings etc. within the state of Himachal Pradesh on different occasions.
    • Taxis are also hired to drop shi staff at High Power Transmitter during morning/ evening & for office work during day me.

Issue before the AAR

  • Whether input tax credit is available to the applicant on the services availed for the aforementioned items through contractors and what rate of GST will be applicable on the same.

Provisions of Law referred

  • Sec 16 of the CGST Act, 2017, every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used or intended to be used in the course or furtherance of his business.
  • 17(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (b) the following supply of goods or services or both,-
    • food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance;
    • Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;-

Discussion and Finding of AAR

  • According to Proviso to Secon 17(5)(b) ITC in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for me 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.
  • Further as per Noficaon No. 20/2017 dated 22.08.2017 and Circular No. 130/49/2019-GST dated: 31.12.2019, Suppliers of service by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient have an option to pay GST either at 5% with limited ITC (of input services in the same line of business) or 12% with full ITC.

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