No Input Tax Credit on Motor Vehicles purchased for Rent-a-Cab Service: AAR [Read Order]

The Authority for Advance Rulings (AAR), West Bengal has held that the GST paid on the purchase of motor vehicles for supplying rent-a-cab service is not admissible for credit in terms of section 17(5)(b)(i) of the GST Act.

The applicant claimed that she supplies rent-a-cab service, as defined in the Finance Act, 1994. She refers to section 17(5)(a)(B) of the GST Act that allows credit of input tax paid on the purchase of motor vehicles when used for supplying passenger transportation service. The Applicant submits that people take the car on rent for the transportation of passengers.

It was contended that Rent-a -Cab is, therefore, essentially associated with the transportation of passengers. GST paid on the purchase of motor vehicles for supplying rent-a-cab service should, therefore, be admissible in terms of section 17(5)(a)(B) of the GST Act. He submits photocopies of a few invoices, showing that the invoices are made on the distance travelled.

The AAR observed that the Act did not allow credit of GST paid on inputs for supply of rent-a-can service, except under certain specific conditions that are not applicable in the applicant’s case. lt rules out credit of input tax paid online purchase of motor vehicles used for supply of rent-a-cab service if the transaction was effected before 0110212019.

It was further observed that the amended provisions of section 17(5)(b)(i) of the GST Act do not contain a reference to the rent-a-cab service. However, post-amendment, the input tax credit shall not be available in respect of the supply of the service of renting or hiring of motor vehicles.

“Rent-a-cab is not defined in the GST Act. Nature of the Applicant’s service is, therefore, derived from what is stated in the Application and what can be ascertained from the invoices. The Applicant provides cab rental service inter alia to institutions like West Bengal Postal Service. The recipient, as discussed in para 4.6, has to pay the Applicant a certain amount per month as consideration irrespective of what distance the cab travels in a particular month. The additional amount has to be paid if the cab is retained for extra hours or requisitioned on holidays. For the purpose of covering the cost of fuel, the distance travelled needs to be brought into play, but only if it crosses a certain threshold. lt is, therefore, clear from the above discussion that the nature of the service the Applicant provides is classifiable under SAC 9966 as renting of a motor vehicle. The credit of GST paid on the purchase of motor vehicles or other inputs for the supply of the Applicant’s service is not, therefore, admissible in terms of section 17(5XbXi) of the GST Act,” the AAR said.