Input Tax Credit (ITC) Eligibility for Leasing of Motor Vehicles for Women’s Safety under GST

By: Admin | October 21, 2024
Category: Advance Ruling – New
Read Time: 4 Minutes

The Tamil Nadu Authority for Advance Ruling (AAR), in the case of M/s. CMA CGM Global Business Services (India) (P.) Ltd., ruled on the eligibility of Input Tax Credit (ITC) for tax paid on services related to leasing, renting, or hiring motor vehicles for women employees’ safety and security. This ruling is based on compliance with the Tamil Nadu Shops and Establishments Act, 1947, and the provisions of the Central Goods and Services Tax (CGST) Act, 2017.

Key Highlights:

  1. Eligibility for ITC: Assessee can claim ITC only on services related to leasing/renting motor vehicles for transporting women employees who work between 8 PM to 6 AM.
  2. Compliance: The Applicant’s compliance with mandatory transportation provisions under the Tamil Nadu Shops and Establishments Act ensures ITC eligibility, subject to fulfilling Section 16 of the CGST Act.
  3. Conditions: ITC is allowed for transportation facilities for women employees to ensure their safety, provided these services comply with GST conditions outlined under Section 16 and 17 of the CGST Act.
  4. Time Period for ITC: ITC can only be claimed for services availed after May 28, 2019, when the Tamil Nadu Government made transportation facilities mandatory for women employees working late shifts.
  5. Blocked Credits: Services of leasing/renting motor vehicles typically fall under blocked credit, but ITC becomes eligible if required under legal obligations.

Legal Ruling Breakdown:

Section 16 of CGST Act: Defines the conditions for claiming ITC.

Section 17 of CGST Act: Specifies the apportionment of credit and blocked credits. Leasing of motor vehicles for employee transport is blocked unless legally mandated.

CBIC Circular 172/04/2022: Clarifies the provisions for claiming ITC on goods and services used to fulfill statutory obligations by an employer.

Facts:

M/s. CMA CGM Global Business Services provides back-office support services in the IT sector and ensures the safety of its women employees by offering transportation facilities during night shifts, as mandated by the Tamil Nadu Shops and Establishments Act. The company sought clarification on whether ITC could be claimed on services related to leasing/hiring motor vehicles for women employees.

Conclusion:

The AAR ruled that ITC can be claimed on tax paid for leasing/renting motor vehicles for the transportation of women employees, provided the conditions in the CGST Act are fulfilled. ITC is available only for services availed after May 28, 2019, in compliance with the Tamil Nadu Shops and Establishments Act.

GSTUpdate #InputTaxCredit #WomensSafety #TaxationLaws #AdvanceRuling #CGST #BusinessCompliance #TaxCredit #MotorVehicleLeasing #ITCRules

Share on Facebook Share on Twitter