Taxpayer eligible to take ITC on GST paid under RCM @ 5% for the hiring of buses for transportation of employees: AAR

The Maharashtra Authority of Advance Ruling (AAR) has held that the taxpayer is eligible to take ITC on GST paid under RCM @ 5% for the hiring of buses for transportation of employees.

The Applicant, MAANICARE SYSTEM INDIA PRIVATE LIMITED is a Private Limited Company and is engaged in the business of providing manpower services. The Applicant had entered into an agreement with M/s. Renaissance Jewellery Limited for the supply of manpower at their premises.

The Applicant is in the business of Providing Manpower Supply to various corporate clients. They are providing bus (50 person seating capacity) service to their employee to reach at employment place on time. Service provided by bus owner comes under Reverse change mechanism as per Notification no. 22/2019 dated 30.09.2019.

The applicant has sought an advance ruling in respect of the question that whether the company (Maanicare System India Pvt Ltd) is eligible to take an input tax credit on GST paid under Reverse Charge Mechanism@ 5% for the hiring of buses for transportation of employees.

The coram of Rajiv Magoo and T.R. Ramnani has held that in the instant case, the bus service availed by the Applicant is 49-seater i.e. more than 13 seater. Accordingly, the same is not falling under the block credit as provided under section 17(5) of CGST Act 2017 and, therefore, in the instant case, (since the applicant is utilizing the services of renting of a motor vehicle for business or furtherance of business), the input tax credit is not restricted to the applicant under the referred Section 17(5) of CGST Act 2017. Thus the applicant would be eligible for ITC but only with effect from 01/02/2019 only, as per the above legal provisions.