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ITC of motor vehicle purchased for providing rent-a-cab services is inadmissible under GST

June 12, 2019[2019] 106 taxmann.com 108 (AAR - WEST BENGAL)
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GST : GST paid on purchase of motor vehicles for supplying rent-a-cab service is not admissible for credit in terms of section 17(5)(b)(i)

• The applicant was supplying cabs on a rental basis. It submitted that people take the car on rent for the transportation of passengers. Rent-a-Cab was, therefore, essentially associated with the transportation of passengers. GST paid on the purchase of motor vehicles for supplying rent-a-cab service should, therefore, be admissible in terms of section 17(5)(a)(B).

• It sought an advance ruling on whether credit was admissible of the input tax paid on the purchase of motor vehicles for the supply of the above service.

• Rent-a-cab is not defined in the GST Act. Nature of the applicant's service is, therefore, derived from what is stated in the application and what can be ascertained from the invoices. The applicant provides cab rental service inter alia to institutions like West Bengal Postal Service. The recipient has to pay the applicant a certain amount per month as consideration irrespective of what distance the cab travels in a particular month. Additional amount has to be paid if the cab is retained for extra hours or requisitioned on holidays. For the purpose of covering the cost of fuel, the distance travelled needs to be brought into play, but only if it crosses a certain threshold. It is, therefore, clear from the above discussion that the nature of the service the applicant provides is classifiable under SAC 9966 as renting of a motor vehicle. Credit of GST paid on purchase of motor vehicles or other inputs for the supply of the applicant's service is not, therefore, admissible in terms of section 17(5)(b)(i).

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