GST AAR: ITC Allowed on Mandatory Employee Transport, Limited to Night Shift Women

M/s. AGS Health Private Limited, engaged in IT-enabled and BPO services for overseas clients, operated in multiple shifts due to differing time zones, with work hours extending beyond 8 PM. Being registered under the Tamil Nadu Shops and Establishments Act, 1947, the company was legally required to provide safe transportation facilities to women employees working night shifts. To comply, the applicant hired motor vehicles for employee transportation without recovering any cost from employees and had not availed ITC on such services due to uncertainty around Section 17(5) of the CGST Act.

Following the insertion of the proviso to Section 17(5)(b) (effective 01.02.2019), which allows ITC where provision of services is obligatory under law, the applicant sought clarity on eligibility of ITC on such transportation services, including whether full ITC could be claimed and whether it could be availed retrospectively from the date of amendment.

Main Issue: Whether ITC on leasing/hiring of motor vehicles used to provide transportation to employees (especially women working night shifts) is admissible under Section 17(5)(b), and if so, to what extent and from which date.

Tribunal’s Decision: The Authority held that ITC on hiring/leasing of motor vehicles, though generally blocked under Section 17(5), becomes admissible where such services are mandatorily required under law. Since the Tamil Nadu Shops and Establishments Act mandates employers to provide transport facilities ensuring safety of women employees working between 8 PM and 6 AM, ITC is allowable in such cases.

However, the benefit is not blanket. ITC is restricted only to transportation provided to women employees during the specified night hours as mandated by law. It cannot be extended to all employees or all shifts. On the question of timing, the Authority clarified that ITC would be available only from 28.05.2019, i.e., the date when the state notification made such transport facilities obligatory, and not merely from the date of amendment to Section 17(5). Further, ITC availment remains subject to the time limits prescribed under Section 16(4), which cannot be relaxed on grounds of procedural hardship.

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