GST ITC Available on Hydrotreated Vegetable Oil/Renewable Diesel Used for GTA Services u/ Forward Charge Mechanism: AAR [Read Order]

The Chhattisgarh Authority for Advance Ruling (AAR) recently ruled that a registered Goods Transport Agency (GTA) is eligible to claim Input Tax Credit (ITC) on the Goods and Services Tax (GST) paid for Hydrotreated Vegetable Oil (HVO)/Renewable Diesel that is used as fuel in trucks deployed for providing transportation services under the forward charge mechanism.

The ruling was delivered in an application filed by M/s Jai Ambey Roadlines Private Limited (Jai Ambey), seeking clarity on ITC admissibility under the Central Goods and Services Tax Act, 2017.

Jai Ambey is engaged in providing transportation of goods by road under forward charge mechanism, while using HVO/Renewable Diesel for its transport fleet. The Applicant contended that since the fuel is consumed in the course of providing taxable services, the GST paid qualifies as input tax and is eligible for credit under the CGST Act as no restriction exists on availing such credit.

The applicant raised two queries before the Authority: firstly, whether they are eligible to avail ITC on the tax charged by the supplier on HVO/Renewable Diesel where such fuel is used for providing GTA services taxable under the forward charge mechanism;

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Secondly, whether the use of HVO/Renewable Diesel as fuel in trucks is legally permissible and technically feasible for transportation purposes.

Vivek Saraswat, Abhay Tiwari and Princee Dhawna appeared for the applicant during the personal hearing and submitted that HVO or Renewable Diesel is a biofuel used in the course of business. It was submitted that the GST paid on such purchases should be available as ITC as they are directly linked to taxable supplies and that no restriction has been placed by the CGST Act for GTAs paying tax under the forward charge mechanism.

The Bench comprising Yachana Tambrey (Joint Commissioner / O/o Commissioner, State Tax) and Dr. Bura Naga Sandeep (Additional Commissioner / O/o Principal Commissioner, CGST & Central Excise, Raipur) examined Section 16 of the CGST Act, 2017 which permitted registered persons to claim ITC on goods or services used in the course or furtherance of business, provided that due tax has been paid, invoices are furnished and returns are filed.

The Authority observed that HVO/Renewable Diesel used for operating vehicles in transportation services qualifies as an input under Section 16, subject to fulfillment of all statutory conditions.

The Bench further perused the provisions of Section 17(5) of the Act pertaining to blocked credits. It was clarified that while ITC on motor vehicles used for passenger transport is restricted, no such prohibition applies to inputs like fuel used for GTA services and hence, ITC on fuel is not blocked under Section 17(5).

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Reference was made to the Supreme Court decision in State of Karnataka v.Ecom Gill Coffee Trading Pvt. Ltd. (2023), reaffirming that the burden of proving ITC eligibility lies on the claimant under Section 155 of the CGST Act. The Authority held that fuel purchased for use in taxable GTA services qualifies as an eligible input, making ITC available subject to compliance with Sections 16 and 17.

Regarding the legality, technicality, viability, or feasibility of blending, storage, or usage of HVO/Renewable Diesel by the applicant, the Bench held that it is not authorized to pass any conclusive remarks as these matters fall outside its jurisdiction and pertain to other regulatory bodies, including the Ministry of Petroleum and Natural Gas.

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