Maharashtra AAR: ITC Available on Transportation Facilities Provided to Employees

The Maharashtra Authority of Advance Ruling (AAR) has in its recent ruling has held that the Input Tax Credit (ITC) is available to the applicant on Goods and Services Tax (GST) charged by the service provider. However, the hired bus/motor vehicle should have a seating capacity of more than thirteen persons, and it should be used for the transportation of employees to and from the workplace only after 01 February 2019.

The applicant, M/s Tata Motors Limited (applicant) is in the business of manufacturing commercial and passenger vehicles. The applicant has hired a non-air-conditioned bus to provide commutation facilities to its employees to and from the workplace. For the transportation facilities offered to employees, the applicant is recovering some nominal amount from them.

The issue is whether ITC is available to the applicant on GST charged by the service provider on the hiring of bus/motor vehicle or not. If ITC is available, will it be restricted to the extent of the cost borne by the applicant or is GST applicable on the nominal amount recovered by the applicant from employees for the usage of the employee bus transportation facility?

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Section 17(5) of the CGST Act, 2017 has debarred ITC on motor vehicles or conveyances used in the transport of passengers till the date of the amendment, i.e. 01.12.2019. However w.e.f. 01.12.2019, ITC has been allowed on leasing, renting or hiring of motor vehicles, for transportation of persons, having a seating capacity of more than thirteen persons (including the driver).

The applicant stated that it is not supplying any services to its employees, given Schedule III (Employer-Employee relation) and they believe that GST is not applicable on the nominal amounts recovered by the applicants from their employees.

The AAR ruled that ITC is available to the applicant on GST charged by service providers on the hiring of bus/motor vehicles having a seating capacity of more than thirteen persons and which is used for transportation of employees to and from the workplace but only after 01 February 2019. Further such ITC will be restricted to the extent of the cost borne by the applicant.

The authority further ruled that GST does not apply to the nominal amount recovered by the applicant from employees for the usage of the employee bus transportation facility.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in