M/s. Tata Motors Limited sought an advance ruling in respect of the following questions:

1. Whether input tax credit (ITC) available to Applicant on GST charged by service
provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace?

2.Whether GST is applicable on nominal amount recovered by Applicants from employees
for usage of employee bus transportation facility in non-air conditioned bus?

3.If ITC is available as per question no. (1) above, whether it will be restricted to the extent of cost borne by the Applicant (employer)?

Ruling delivered on 25th August 2020:

1. Applicant has engaged service providers to provide transportation facility to its employees, in non-air conditioned buses having seating capacity of more than 13 persons. Sr. No. 15 (b) of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 exempts service provided for "transport of passengers, with or without accompanied belongings, by non-air-conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire". Service providers are having contract carriage permit issued by the relevant regulatory authorities in respect of buses deployed for employee transportation service.

Section 17(5)(b)(i) of the CGST Act, 2017 has been amended, w.e.f. 01.02.2019, to block ITC on leasing, renting or hiring of motor vehicles having approved seating capacity of not more than 13 persons. Hence ITC is allowed in this case of  hiring of motor vehicles having seating capacity of more than 13 persons only after 01st Feb 2019.

2. To ensure use of transportation facility only by authorized employees, Applicant issued passes to employees and a nominal amount was recovered on monthly basis. By Press release dated 10.07.2017, it was clarified that supply by employer to the employees in terms of contractual agreement of employment entered into between employer and employee is a part of salary cost to company.  Hence this amount recovered will not be subject to GST.

3. Since only nominal amount is recovered from employees the difference between amount paid to service provider and amount recovered from employees is cost to company as salary cost. Therefore expenditure on employee bus transportation service borne by Applicant is part and parcel of cost to company. Hence ITC will be restricted to the amount borne by the employer.

Thus, in order to take benefit of Sr. no. 15(b) of the exemption Notification No. 12/2017-Cetral Tax (Rate) dated 28.06.2017 following conditions should be satisfied:

a) Service is provided for transportation of passengers.

b) By a non-air-conditioned contract carriage. 

c) The vehicle should have a contract carriage permit under the Motor Vehicle Act. 

d) Requirements under Section 2(7) of the Motor Vehicles Act should be fulfilled.

e)    The transportation should not be for the purpose of tourism, conducted tours, charter.

f)    Should not be a radio taxi.