In re YKK India Private Limited (GST AAR Haryana)
1. The applicant is not eligible to take input tax credit on:-
a. GST charged by the Contractor for hiring of buses for transportation of employees.
b. GST charged by the Contractor for hiring of cars for transportation of employees?
2. The restriction on ‘Rent a Cab’ service specified in Section 17(5)(b)(iii) is applicable to input tax credit on:-
a. GST charged by the Contractor for hiring of buses for transportation of employees.
b. GST charged by the Contractor for hiring of cars for transportation of employees.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING
1. M/s YKK India Private Limited (hereinafter referred to as the “applicant”) is engaged in the business of supply of slide fasteners, chains, sliders etc. (‘Zipper’ or ‘Final Product’). In furtherance to its business of supply of the said Final Products mentioned above, the Applicant uses various goods as well as services for which the applicable tax under the CGST Act or the relevant State Act or Union Territory Acts under GST regime or Integrated Goods and Services Tax Act, 2017 are paid to the supplier, which fall within the meaning and definition of input tax defined under Section 2(62) of the Act.
2. The Applicant has its unit at Plot No. 699, Sector 2, HSIIDC Growth Centre, Bawal, Distt-Rewari, Haryana and Plot No.122, Sector 6, HSIIDC Growth Centre, Bawal, Distt-Rewari, Haryana (‘Factories’) where the employees of the Applicant are engaged in manufacturing the Final Products. Further, apart from employees manufacturing Final Products, various managerial service employees also carry out their day to day affairs from the said Factories. The said Factories of the Applicant are situated at remote location in Haryana where public transport is very minimal which hinders transportation of employees to reach the Factories.
3. Accordingly, in order to carry out its business of supply of its Final Product and for efficient functioning of its business as a whole, the Applicant has engaged various contractual service provider who provide transportation services and ensure that employees of the Applicant are able to reach the factories in time for doing their day to day work as scheduled. It is in this regard that the Applicant enters into contract with the said suppliers for hiring buses as well as cars. In this regard, reference is made to sample contract entered between Deep Travels (‘Contractor’) and the Applicant, both situated in Haryana, for provision of Transportation Services (also referred to as ‘Transportation Services’) to its employees from various locations to Factories. The Applicant has summarised the relevant terms of the sample agreement below for ease of reference:-
a. The Contractor shall provide transport Services to employees of the Applicant from Factories to Kakarwali, Rewari by way of a buses
b. The Contractor shall deploy trained personnel viz. driver and helper buses to provide transportation Services to employees of the Applicant from Factories to Kakarwali, Rewari. The said driver and helper shall be employee of the Contractor and remain under supervision and control of the Contractor.
c. The Applicant shall inter-alia pay a monthly fees of Rs. 1,48,000/- and applicable tax to the Contractor for provision of Input Service.
d. The Contractor shall provide point to point Transportation Services to employees of the Applicant by ensuring that driver only take routes approved by the Applicant. Any alteration in the transportation Services by the Applicant shall require that Applicant gives prior information to Contractor about the alteration.
4. In furtherance of the aforesaid Agreement, the Contractor raised invoices on the Petitioner on the basis of usage i.e. running of the buses or cars or monthly payments for specified routes of such buses or cars, as the case may be. The said invoices are raised on the Applicant along with applicable goods and service tax (hereinafter referred to as ‘GST’) which comprises Central GST and Haryana GST by classifying the activities under HSN 996413 viz. Non-scheduled local bus and coach charter services, attracting GST at the rate of 18%.
5. In view of the fact that the aforementioned GST payment on the invoices raised by the Contractor falls within the meaning of input tax credit under Section 2(63) read with 2(62) of the Act, the Applicant is of the view that the Applicant is eligible to take credit of the GST paid subject to fulfillment of the conditions specified in Chapter V of the Act which deals with input tax credit.
6. Questions on which ruling has been sought by the applicant, are as under:-
i. Whether the Applicant is eligible to take input tax credit on:-
a. GST charged by the Contractor for hiring of buses for transportation of employees?
b. GST charged by the Contractor for hiring of cars for transportation of employees?
ii. Whether the restriction on ‘Rent a Cab’ service specified in Section 17(5)(b)(iii) is applicable to input tax credit on:-
a. GST charged by the Contractor for hiring of buses for transportation of employees?
b. GST charged by the Contractor for hiring of cars for transportation of employees?
RECORDS OF PERSONAL HEARING – 2nd PROVISOS TO SECTION 98(2) OF CGST/HGST ACT, 2017
7. Opportunity for personal hearing was granted to the applicant on 20.06.2018. The party sought adjournment through post. The second personal hearing was held on 10.07.2018, which was attended by Sh Kishore Kunal, Advocate, on behalf of the applicant. He reiterated the submissions made in their application. He further explained that as they do not take control of the vehicles themselves and that the vehicles remain with the contractor all the time, the services obtained by the applicant do not fall under “rent a cab ” services , but under tariff head 996413 i.e.” Non scheduled Local bus and coach charter service “@ 18%. They are therefore, eligible to avail ITC on the GST paid for such services.
After detailed hearing the application was admitted as the questions raised by the applicant are covered under section 97 (2) (d) of the CGST/HGST Act, 2017. As regard merits the decision was reserved which is being released today.
DISCUSSIONS AND FINDINGS OF THE AUTHORITY
8. We have carefully gone through the application for advance ruling and submissions made by the applicant. The applicant is registered taxpayer and has entered into agreement for hiring commercially licensed vehicles for transportation of their employees. The question raised by the applicant is whether they are eligible to avail input tax credit of GST paid by the contractor on the services rendered by them to the applicant.
9.As per Section 16 of the of the CGST/HGST Act, 2017, every registered person shall, 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. However, on this availment of input tax credit (ITC), there are exceptions prescribed under Section 17(5) of the CGST/HGST Act, 2017, which provides that:-
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:-
(a). …………………………
(b) the following supply of goods or services or both,-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) rent-a-cab, life insurance and health insurance except where,-
(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
(iv) travel benefits extended to employees on vacation such as leave or home travel concession;
(c). …………………….
10.The point which merits examination here is that whether the impugned services are covered by the definition of “rent-a-cab” and hence ineligible for ITC. In this regard, it is observed that the phrase “rent-a-cab” has not been defined in the CGST/HGST Act, 2017. In situations where statutory meaning of any term/phrase has not been provided words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances, as has been held by the Hon’ble High Court of Allahabad in the case of Godrej Consumer Products Limited Vs. Commissioner of Commercial Tax [2018 (13) G.S.T.L. 135 (All.)]. Hence, we first proceed to examine as to what is rent-a-cab.
11. As per information available on website https://en.wikipedia.org/wiki/Cab, Cab means
Cab or CAB may refer to:-
Tran sport [edit]
