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No ITC on GST Paid for Transportation Service of Employees

The Authority for Advance Ruling (AAR) Himachal Pradesh bench released ruling and cleared that input tax credit (ITC) can’t be claimed by companies for GST paid on hiring commercial vehicles for transportation of employees If companies are providing such a service then such a service is not covered under any law.

The AAR Himachal Pradesh also stated that “according to GST Law to state, ITC will be available on fulfilment of one condition – ‘such goods or services or both shall be obligatory for an employer to provide to its employees under any law for the time being force’”.

The ruling comes while responding to an application filed by Prasar Bharti Broadcasting Corporation (All India Radio), Shimla. As per the details received The applicant is a public service broadcaster, seeks an advance ruling to know whether Input Tax Credit can be availed on taxi hiring services for transportation facility to staff in odd hours, Staff includes ladies and differently-abled employees. The Prasar Bharti Broadcasting Corporation also hires taxis for tours and OB recordings with the state.

In the released ruling AAR said that since the appellant failed to represent a statement of any law that considers the service of providing transportation facility to its employees is obligatory, thus ITC will not be available.

The AAR said that “If the facility provided by a taxpayer for transportation of employees is not obligatory under any law for the time being in force, then no ITC will be available to such a taxpayer,”.

Rajat Mohan, Senior Partner, AMRG & Associates said that “AAR Himachal Pradesh has restricted the tax credit on services of hiring commercially licensed vehicles for the transportation of its employees”.As a result, businesses will miss the tax benefits of hiring vehicles for providing transportation facilities to employees including women employees and differently-abled employees.

Rajat Mohan further added that “This will affect the perquisite value of benefits given to the workforce on account of transportation and would also result in increasing the levy of income tax on such additional costs incurred by the company,” Mohan added.