Credit not available on GST paid to Contractor for Hiring Vehicles for Employees: AAR [Read Order]

The Authority for the Advance Ruling (AAR), Haryana has ruled that the company cannot claim input tax credit (ITC) on the GST paid to the contractor for hiring vehicles for the transportation of the employees.

The applicant-Company entrusted a contractor, Deep Travels from whom it hired commercially licensed vehicles for providing transportation services to its employees from various locations to its factory. Under the agreement between the contractor and the applicant, the contractor sent invoices with the applicable GST amount. The applicant approached the AAR asking their eligibility to avail input tax credit in respect of the said payment.

Before the authority, the applicant contended that the said GST payment is within the meaning of input tax credit under section 2(63) of the Central and Haryana GST Acts.

When it comes to Goods and Services Tax, tax on services finds its genesis from Chapter V of the Finance Act, 1994, i.e., the Service Tax statute. Therefore, the definitions relating to “rent-a-cab” as occurring in the Finance Act, 1994, shall also have bearing on what is meant by “rent-a-cab” in common commercial parlance when it comes to understanding the same for the purpose of taxing statutes. – As per Section 65(105)(o) — ‘taxable service’ means any service provided or to be provided “to any person, by a ‘rent-a-cab scheme operator’ in relation to the renting of a cab.” – Section 65(91) — “rent-a-cab” operator means any person engaged in the business of renting of cabs.”

The authority rejected the contentions of the applicant that hiring of buses which can carry large number of passengers would not qualify under “rent-a-cab”. According to the authority, the activitiy of the contractor in the instant case, providing buses or cars on hire to the applicant, is specifically covered under the meaning of “rent-a-cab”, which makes the impugned supply as ineligible for ITC in terms of Section 17(5) of the CGST/HGST Act, 2017.

“The contentions of the applicant that due to different in the phrases “hire” and “rent”, in their case the impugned would not quality as “rent-a-cab”, have no grounds, as the proposition pronounced in the above cited case law clearly points out that “hiring” and “renting” are synonyms. 15. In view of above, it clearly stands established that the services of the Contractor for hiring of buses/cars for transportation of employees qualify as “rent-a-cab” services. Further, it is also observed that nothing has been brought on record to suggest that the impugned service is not a service which is obligatory for an employer to provide to its employees under any law for the time being in force; or that such inward supply of services is being is used by the applicant for making an outward taxable supply of the same category of services or as part of a taxable composite or mixed supply,” the AAR said.