ITC cannot be Availed on GST Paid for Hiring Vehicles for Employee Transportation

AIR, Shimla has filed an application seeking whether an input tax credit will be available on taxi hiring services like pickup/drop-off staff, including ladies and disabled employees, in odd hours.

Companies will not be able to claim an input tax credit (ITC) for GST paid on hiring commercial vehicles for transportation of employees, if providing such a service is not obligatory under any law, the Authority for Advance Ruling (AAR) has said.

On an application filed by Prasar Bharti Broadcasting Corporation (All India Radio), Shimla, the Himachal Pradesh bench of AAR cited GST law to state ITC shall 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 applicant, who is a public service broadcaster, sought to know whether ITC will be available on taxi hiring services like pickup/drop-off staff, including ladies and disabled employees, in odd hours.

The company also hires a taxi for tour/OB recordings with the state.

The AAR in its ruling said since the applicant failed to cite any law under which the service of providing transportation facility to its employees is obligatory, ITC will not be available.

“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,” the AAR said.

AMRG & Associates Senior Partner Rajat Mohan said Himachal Pradesh AAR has restricted the tax credit on services of hiring commercially licensed vehicles for the transportation of its employees.

Thereby, businesses will have to forego the tax benefits availed on the hiring of vehicles for pick/drop facility being provided to lady employees, disabled employees and other employees.

“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.