Case Law Details
In re EFC Logistics India Pvt. Ltd. (GST AAR Odisha)
In the case of “In re EFC Logistics India Pvt. Ltd. (GST AAR Odisha),” M/S EFC Logistics India Pvt Ltd (hereinafter referred to as the ‘Applicant’), filed an application for an advance ruling under Section 97 of the CGST Act, 2017, and the corresponding section of the OGST Act. The Applicant is a Goods Transport Agency (GTA) registered under the GST provisions, providing transport services to M/s Rungta Mines Ltd., and paying GST at a rate of 12% under the Forward Charge Mechanism with input tax credit (ITC).
Questions for Advance Ruling
The Applicant sought clarification on two main points:
- Whether the supplier, being the owner of the vehicle itself, can charge GST on rental/hiring services under the Forward Charge Mechanism, even though his service is exempted.
- If the answer to the first question is “yes,” whether the Applicant, being a GTA, can claim ITC on the basis of the supplier’s invoices under Section 16 of the CGST Act, 2017.
Background
The Applicant intends to enter into an agreement with M/S Govinda Transport Private Limited, the vehicle owner, to rent vehicles. The rental agreement includes fuel, tolls, driver’s salary, repairs, and other maintenance costs. The Applicant referenced Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, specifically Entry No. 22(b), which exempts services by way of giving on hire to a GTA, a means of transportation of goods, implying that the supplier (Govinda Transport) is not entitled to charge GST.
Personal Hearing and Submissions
A personal hearing was conducted on 23.04.2024, where the Applicant, represented by Shri Vikash Kumar Rateria, reiterated the submissions made in the application. The revenue authorities did not provide any comments or appear for the hearing.
Analysis and Ruling
Question 1: GST Chargeability on Rental/Hiring Services
The Authority for Advance Ruling (AAR) considered whether the supplier can charge GST on rental/hiring services under the Forward Charge Mechanism. However, they found that this question is not maintainable under Section 95(a) of the CGST Act, 2017. According to this section, an advance ruling pertains to matters or questions specified in Section 97(2) or Section 100(1), relating to the supply of goods or services undertaken or proposed to be undertaken by the Applicant. Since the Applicant is not the supplier of the rental services, the question falls outside the purview of the advance ruling, and therefore, no ruling could be provided on this point.
Question 2: Eligibility for Input Tax Credit (ITC)
The AAR examined the eligibility for ITC under Section 16 of the CGST Act, 2017, which states that every registered person is entitled to ITC on goods or services used or intended to be used in the course or furtherance of business. The Applicant, being a GTA and registered under GST, paying 12% GST under the Forward Charge Mechanism, is eligible to claim ITC. This is contingent on fulfilling the conditions and restrictions specified in Section 16 of the CGST Act, 2017.
Conclusion
The ruling provided by the AAR can be summarized as follows:
- Chargeability of GST on Rental/Hiring Services: The question regarding whether the supplier can charge GST under the Forward Charge Mechanism is not maintainable as per Section 95(a) of the CGST Act, 2017, since it pertains to the inward supply of services not undertaken by the Applicant.
- Claim of Input Tax Credit (ITC): The Applicant, as a registered person under GST, can claim ITC on any supply of goods or services used in the course or furtherance of business, subject to compliance with Section 16 of the CGST Act, 2017.
Appeals
The Applicant or the jurisdictional officer, if aggrieved by this ruling, may appeal to the Odisha State Appellate Authority for advance ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of the advance ruling.
Implications
This ruling clarifies that while the authority may not adjudicate on the chargeability of GST on inward supply for the Applicant, it does affirm the eligibility of ITC for GTAs on expenses incurred in the course of business, provided all conditions under Section 16 are met.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, ODISHA
Subject: M/S EFC Logistics India Pvt Ltd (herein after referred to as the ‘Applicant’) having principal place of business/registered office/corresponding address At Mahatab Road, Cuttack, 753012 bearing GSTIN 21AABCE3742R2Z1 has filed an application for advance ruling under Section 97 of CGST Act, 2017 and Section 97 of the CGST Act, 2017 in FORM GST ARA-01 discharging fee of Rs. 5,000/- each under the CGST Act and the SGST Act.
1.0 The Applicant has sought ruling in respect of the following questions.
(a) Whether the supplier, being the owner of the vehicle itself, can charge GST on rental/hiring services under the Forward Charge Mechanism. Even though his service is exempted.
(b) If the answer to question above is “yes”, whether the Applicant being a Goods Transport Agency, be able to claim the Input Tax Credit in terms of Section 16 of GST Act 2017,(hereinafter to be refer as CGST/OGST Act), on the basis of suppliers invoices
1.1 At the outset, we would like to make it clear that the provisions of both the CGST Act and the OGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act.
2.0 Submission of the Applicant
2.1 The Applicant M/S EFC Logistics India Pvt Ltd, Office at Mahatab Road, Cuttack,753012 is a GTA registered under the provisions of Section 22 of the CGST Act,2017. The Applicant is engaged in providing transport service to M/s Rungta Mines Ltd. and opted to pay GST @12% under the Forward Charge Mechanism with input tax credit.
2.2 The Applicant is planning to enter into an agreement with M/S Govinda Transport Private Limited who is a supplier/owner of vehicle. The Applicant intends to take vehicle on rental basis from Govinda Transport Private Limited. The rental will be inclusive of the Fuel, Toll , salary of Driver, Repairs and Maintenance of the Vehicle and any other ancillary expenses related to the vehicle.
2.3 The Applicant submitted that services by way of giving on hire to a GTA, a means of transportation of goods are exempted in view of Entry No. 22(b) of Notification No. 12/2017-Central Tax(Rate) dated 28.06.2017. Being a GTA, service provided by M/s Govinda Transport Private Limited by way of hiring/renting of vehicles/trucks to the Applicant is exempted from payment of GST and hence, the supplier is not entitled to charge GST .
3.0 The personal hearing was fixed on 23.04.2024 under due intimation to the Applicant, the jurisdictional officer of State GST & jurisdictional officer of Central GST (intimated through their respective Commissionerates along with a copy of the application and the written submission of the Applicant). The Applicant through its representative Shri Vikash Kumar Rateria, CFO appeared for personal hearing. Shri Rateria re-iterated the submission already furnished in the application filed for advance ruling. The Revenue has neither submitted its comments nor appeared for personal hearing.
4.0 we have gone through me advance ruling application, questions on which advance ruling has been sought and the Applicant’s interpretation of law and/or facts, as the case may be, in respect of the questions asked.
4.1 The Applicant is a Goods Transport Agency (GTA) who provides service in relation to transport of goods by road and issues consignment note. The Applicant has sought ruling in respect of the following questions:-
(a) Whether the supplier, being the owner of the vehicle itself, can charge GST on rental/hiring services under the Forward Charge Mechanism. Even though his service is exempted
(b) If the answer to question above is “yes”, whether the Applicant being a Goods Transport Agency, be able to claim the Input Tax Credit in terms of Section 16 of GST Act 2017,(hereinafter to be refer as CGST/OGST Act), on the basis of suppliers invoices
4.2 First question is asked as to whether a supplier of service can charge GST on rental/’hiring services under the Forward Charge Mechanism to the Applicant. This question of chargeability on inward supply of services appears to be not maintainable in view of the Section 95(a) of the CGST Act, 2017. As per the said section, ‘advance ruling’ means a decision provided by the Authority or the Appellate Authority (or the national appellate authority) to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100(or of section 101 C), in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. In the instant case, no supply in respect of renting/hiring of vehicles is undertaken or proposed to be undertaken by the Applicant. So, no ruling can be pronounced in this regard.
4.3 As regards the question whether, the Applicant is eligible for ITO of GST paid on rental/hiring services, We see that Section 16 of the CGST Act lays down the eligibility and conditions for taking input tax credit which is reproduced as under:
“Eligibility and conditions for taking input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person”.
As per Section 16(1) of the Act, every registered person is entitled to take ITC charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. In the present case, it is seen that the Applicant is engaged in providing transport service and opted to pay GST @12% under the Forward Charge Mechanism. So, ITC can be admissible to the Applicant subject to fulfilment of conditions and restrictions as specified in Section 16 of the CGST Act, 2017.
RULING
(a) Q.1 Whether the supplier, being the owner of the vehicle itself, can charge GST on rental/hiring services under the Forward Charge Mechanism. Even though his service is exempted.
Ans: The question is not maintainable in view oi the Section 95(a) of the CGST Act, 2017.
(b) If the answer to question above is “yes”, whether the Applicant being a Goods Transport Agency, be able to claim the Input Tax Credit in terms of Section 16 of GST Act 2017,(hereinafter to be refer as CGST/OGST Act), on the basis of suppliers invoices.
Ans: The Applicant being a registered person under GST may be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business subject to fulfillment of conditions and restrictions as specified in Section 16 of the CGST Act, 2017.
6.0 The Applicant or jurisdictional officer, if aggrieved by the ruling, may appeal to the Odisha State Appellate Authority for advance ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of the advance ruling.
