In re Kirby Building Systems & Structures India Private Limited (GST AAAR Telangana)
In the case of Kirby Building Systems & Structures India Private Limited before the GST Appellate Authority for Advance Ruling (AAAR) Telangana, the key issue revolved around the eligibility to claim input tax credit (ITC) on GST paid for transportation services provided to employees. The appellant contended that such transportation was offered in the course of business and not for personal consumption, thus qualifying for ITC under Section 16(1) of the CGST Act, 2017. However, the AAAR examined the restrictions under Section 17(5) of the Act and determined that ITC is blocked for goods or services used for personal consumption, except under certain statutory obligations.
Section 17(5) specifically disallows ITC on motor vehicles used for transporting employees unless mandated by law. The AAAR emphasized that the proviso to Section 17(5) allows ITC only when the employer is legally obligated to provide such services. In this case, the employer’s provision of transportation was not a statutory requirement but rather a measure of convenience for employees working in remote locations. Consequently, the transportation services were classified as personal consumption, rendering ITC ineligible.
The appellant also argued that a contractual obligation to provide such services should be considered equivalent to a statutory obligation. The AAAR rejected this argument, stating that the CGST Act provides no legal basis to equate contractual obligations with statutory ones. The authority also referenced Circular No. 172/04/2022-GST issued by CBIC, which clarified that perquisites offered by employers in terms of contractual agreements fall under Schedule III of the CGST Act and are not taxable. Since transportation services in this case were not taxable, the AAAR held that ITC could not be availed for such non-taxable services.
The appellant relied on rulings from other states to support their position, but the AAAR found these to be fact-specific and not applicable to the present case. Citing the unambiguous statutory language and established jurisprudence, the AAAR upheld the order of the Authority for Advance Ruling (AAR), concluding that the transportation services provided were non-taxable perquisites and did not qualify for ITC.
This ruling reaffirms the limitations imposed by Section 17(5) of the CGST Act, underscoring that ITC is permissible only when specific statutory conditions are met.
Read AAR Order: GST & ITC on recovery from employees against canteen/transportation facilities
