The Maharashtra Authority of Advance Ruling (AAR) has ruled that Input Tax Credit (ITC) is available on GST paid under RCM on hiring of buses for transportation of employees.
As far as input credit on Rent a cab service is concerned, applicant, Maanicare System India Private Limited is providing service to client indirectly as the service charges collected by it are based on percentage of Salary payable to employees; if an employee reaches late, his/her salary will accordingly be deducted and to that extent applicant’s service charge will also be reduced.
The Applicant is paying RCM @12% on Bus service availed by it with Capacity of More than 13 seating, and are eligible to claim input Credit of same.
The applicant has sought the advance ruling on the issue of whether the Applicant (Maanicare System India Private Limited) is eligible to take input tax credit on GST paid under Reverse Charge Mechanism @ 5% for hiring of buses for transportation of employees.
The coram of Rajiv Mango and T.R.Ramnani has held that Section 17 (5) had clearly debarred Input Tax Credit on motor vehicles or conveyances used in transport of passengers till the date of the amendment i.e. 01.02.2019. However with effect from 01.02.2019, Input Tax Credit has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having approved seating capacity of more than thirteen persons (including the driver).
“In the instant case, the bus service availed by the Applicant is 49-seater i.e. more than 13 seater. Accordingly, the same is not falling under the block credit as provided under section 17(5) of CGST Act 2017 and, therefore, in the instant case, (since the applicant is utilizing the services of renting of motor vehicle for business or furtherance of business), the input tax credit is not restricted to the applicant under the referred Section 17(5) of CGST Act 2017. Thus the applicant would be eligible for ITC but only with effect from 01/02/2019 only, as per above legal provisions,” the AAR said.
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