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ITC on Cab Rent charges related to office work

Deepshikha Sharma (Tax Manager) (137 Points)

13 May 2021

We have a transportation facility arrangement with a firm which provided monthly bill for all the trips done by employees. The employees use it for office purpose visits. Can we take ITC on such monthly invoices charged by the vendor.

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10 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 13 May 2021

Yes ITC can be claimed

prasad Nilugal (3914 Points)
Replied 13 May 2021

No , you can not claim input tax credit for renting or hiring of motor vehicle for office purpose , it's block credit as per section 17(5) (b) ( I) of the CGST act 2017
please confirm with others also .

CMA Poornima Madhava (CMA) (13097 Points)
Replied 13 May 2021

ITC in such a case can be availed only if the employer is required under any law to compulsorily provide such transportation facility.

Pavan biyyala (38 Points)
Replied 14 May 2021

Itc cannot be claimed unless employer has an obligation to provide under any law/statue

Deepshikha Sharma (Tax Manager) (137 Points)
Replied 14 May 2021

ITC blocked under sec17(5) is for Motor Vehicles purchased by company and expenses related to it. I'm talking about other firm which is owner of such motor vehicles and charging monthly rental charges for office use from us. And such rental charged by others is nowhere mentioned in Blocked credit under 17(5).

CMA Poornima Madhava (CMA) (13097 Points)
Replied 14 May 2021

"leasing, renting or hiring of motor vehicles" is also covered under section 17(5)

Deepshikha Sharma (Tax Manager) (137 Points)
Replied 14 May 2021

Leasing, renting and hiring of Motor Vehicles ON WHICH ITC IS NOT ALLOWED is mentioned. So the Vendor who is providing renting and hiring of Motor vehicle, if he is taking ITC on purchase of such vehicles then it doesnot fall under above category of "vehicles on which ITC is not allowed".

Transporter can claim ITC on purchase of such vehicles used for rental services of passenger. So we should be eligible for ITC of such rental only if the vendor is registered as supplier of such transportation servies.

This is my understanding and interpretation of Section 17(5)(i). Attached the examples given in a GST reference book.

Attached File : 3168334 20210514130832 itc.jpg downloaded: 121 times

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CMA Poornima Madhava (CMA) (13097 Points)
Replied 14 May 2021

This discussion is taking an interesting turn I think :) The file that you have attached has no mention on services mentioned in section 17(5). Here is an extract of section 17(5): (b) [the following supply of goods or services or both— (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: 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) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.] Source: https://cbic-gst.gov.in/pdf/CGST-Act-Updated-30092020.pdf Further, here is an order from AAR, HP (though not applicable to all, just thought to include here): https://www.financialexpress.com/economy/itc-cannot-be-availed-on-gst-paid-for-hiring-vehicles-for-employee-transportation/1998769/ https://clearmytax.in/all-about-input-tax-credits-on-motor-vehicles-under-gst-law/ (Q12)

CMA Poornima Madhava (CMA) (13097 Points)
Replied 14 May 2021

This discussion is taking an interesting turn I think :)

The file that you have attached has no mention on services mentioned in section 17(5). Here is an extract of section 17(5):
(b) [the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
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) travel benefits extended to employees on vacation such as leave or home travel concession:
Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.]
Source: https://cbic-gst.gov.in/pdf/CGST-Act-Updated-30092020.pdf

Further, here is an order from AAR, HP (though not applicable to all, just thought to include here):
https://www.financialexpress.com/economy/itc-cannot-be-availed-on-gst-paid-for-hiring-vehicles-for-employee-transportation/1998769/
https://clearmytax.in/all-about-input-tax-credits-on-motor-vehicles-under-gst-law/ (Q12)

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Deepshikha Sharma (Tax Manager) (137 Points)
Replied 14 May 2021

@ Poornima I appreciate the efforts you have put in regarding this query. :) And yes now I'm clear with the provision after going through the links and sections mentioned by you. Renting of cab would not be allowed for ITC. Also, it is not even compulsory under any act (eg. Factories Act) so that look out can also not be opted.

Thanks everyone for your inputs.