ITC on Transport/Cab services to employees under section 17(5) of CGST Act, 2017

Query :- Whether the Transport/Cab service provided by the employer to its employees would be eligible to take the input tax credit of the transport service?

Analysis :- 

Clause 17(5)(b) of CGST Act,2017

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

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both 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; and

(iii) rent-a-cab, life insurance and health insurance except where

1.  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

2. 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:

As per Circular No. 172/04/2022-GST, it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act.

Act’s where Government has notified transport services as mandatory :-

Labour Department Notification Dated 7th June,2022:-

Haryana Government has notified to allow employing women in night shifts i.e. from 7 PM to 6 AM in IT,ITE’s, Banking Establishment, three star or above hotels, logistics and warehousing establishments in the state of Haryana and such permission will be granted after fulfillment of various conditions and one of the condition is “The employer shall provide transportation facility to the women workers from their residence and back (for the night shift) and security guards (including female security guard) and each transportation vehicle shall also be equipped with CCTV cameras.”

Therefore, basis the above, it can be said that if any establishment is providing transport service particularly during night shift to women employees from their residence and back then in that case the company is eligible to claim the Input Tax Credit on the transport service taken specifically for women’s working during night shift as per the first proviso to section 17(5)(b)(iii).

Analysis on rent a cab service as per the latest  Circular No. 172/04/2022-GST issued by department.

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Ghaziabad, Uttar Pradesh, India
Member Since: 09 Jan 2019 | Total Posts: 1
Chartered Accountant current working as Indirect Tax Associate. View Full Profile

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3 Comments

  1. Lavanya Rajakumar says:

    This rent a cab provision has been substituted by The Central Goods and Services Tax (Amendment) Act, 2018 w.e.f. 01.02.2019. So how does this have relevance here?

  2. Mansh Nim says:

    The guidelines, to carry and to leave women employees from their residence to work place and then to their residence in night shift, is issued by Haryana Govt. only and it can not be applied in other state as well. Further, the state govt. can not be over and above the provisions defined in GST Act/Rules blocking credits in certain cases like the above. To enjoy the benefits of ITC the same should be notified in the provision resulting applicable to all industries across the country.

    1. rishimittal says:

      Sir this analysis has been done considering the state of Haryana and benefit of the same would be available to Haryana State only.
      Further, recently UP government has also notified the transport services in factories act.

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