Case-Prasar Bharti Broadcasting Corporation of India (GST AAR Himachal Pradesh)
1. Facts: The applicant is a registered taxpayer and has entered into agreement for hiring commercially licensed vehicles for transportation of his employees.
2. Query: 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.
3. Observation by AAR:
a) Availability of ITC-The availability of ITC as per the provision of second proviso to section 17(5)b is available only on the condition that such goods or service or both is obligatory for an employer to provide to its employees under any law for the time 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.
b) Tax Rate-Rate of tax on renting of motor cab services as per the Notification No. 20/2017 (State/Central Tax) dated 22.08.2017 & Circular No. 130/49/2019-GST dated: 31.12.2019 is as under:- The applicable rate of tax on renting of cabs as per Notification No. 20/2017 dated 22.08.2017 is 5% with limited ITC (of input services in the same line of business) and 12% with full ITC.
a) The applicable rate of tax on renting of cabs as per Notification No. 20/2017 dated 22.08.2017 is 5% with limited ITC (of input services in the same line of business) and 12% with full ITC.
b) If the facility provided by a taxpayer for transportation of employees is not obligatory under any law, for the time being in force then no ITC will be available to such a taxpayer. The applicant will however be eligible to claim ITC for the service supplied at 12% GST Rate if the conditions laid down in the second proviso to section 17 (5)b are satisfied.
Hiring, Leasing and Renting are terms which have been used interchangeably by authorities but have been used distinctively under the Law at various places. Likewise Section 17(5)(b) of CGST Act, which uses all three terms together but distinctively, showcasing that they have different meanings and also legislature intends to mean them differently. These terms have not reached to their logical conclusion in GST Regime as well as Service Tax Regime. There are varied judgements which have given varied conclusions on this very subject. Some of the Judgements have been discussed in following articles:
a) #GSTCase-90-Difference between Passenger Transportation Service and Service by way of Renting of Vehicle and Allowability of ITC on Renting of Motor Vehicle-Applicability of Section 17(5) of CGST Act, 2017-https://gst-online.com/gstcase-90-difference-between-passenger-transportation-service-and-service-by-way-of-renting-of-vehicle-and-allowability-of-itc-on-renting-of-motor-vehicle-applicability-of-section-175-of-cgst-act/
b) #GSTCase-38: Activity of Supply of Non-Air-Conditioned Motor Vehicle is an activity of Renting of Motor Vehicle- and the story of Hiring and Renting Continues- https://gst-online.com/gstcase-90-difference-between-passenger-transportation-service-and-service-by-way-of-renting-of-vehicle-and-allowability-of-itc-on-renting-of-motor-vehicle-applicability-of-section-175-of-cgst-act/
c) #GST-Case-31-Is there any difference between Renting of Motor Vehicle and Hiring of Motor Vehicle in GST Regime- https://gst-online.com/gst-case-31-is-there-any-difference-between-renting-of-motor-vehicle-and-hiring-of-motor-vehicle-in-gst-regime/
In the coming articles, we would try to being in a comprehensive over view culminating with the judgements over the subject.
Another significant observation coming indirectly from judgement was that Proviso at the end of Section 17(5)(b) is applicable to all Section 17(5)(b)(i), 17(5)(b)(ii) and 17(5)(b)(iii).