The Tamil Nadu Authority for Advance Ruling ruled that ITC can be availed on renting motor vehicles to provide transportation facility to ensure women employees’ safety.
The Authority made it clear that the provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act are in pari materia and have the same provisions in like matter and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act, 2017.
The bench found that Section 17(5) of the CGST Act, 2017 states that the Input tax credit on services of leasing, renting or hiring of motor vehicles shall not be available as the same falls under the category of blocked credit. However, the provisio to the said sub-section provides 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.
Therefore, it was seen by the bench that CBIC vide circular No. 172/04/2022 dated 06.07.2022, issued by the Ministry of Finance wherein it was clarified that the provisio after sub clause (iii) of clause (b) of subsection (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of subsection (5) of section 17 of the CGST Act.
In the instant case, the Authority observed that as per the provisions of the Tamil Nadu Shops and Establishment Act 1947, it is obligatory on the part of the applicant to provide transport facilities to women employees working beyond 8.00 PM.
The Authority in view of the foregoing provisions of the CGST Act, 2017, CBIC Circular dated 22.07.2022 and Notification of the Government of Tarnil Nadu dated 02.06.2022, found that the applicant is eligible to avail input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 subject to satisfying and fulfilling the eligibility and conditions provided under Section 16 of the CGST Act, 2017.
The bench stated that the Input tax credit on services of leasing, renting or hiring of motor vehicles shall not be available as the same falls under the category of blocked credit and the same becomes eligible for availment as per the provisio to the said sub-section which provides 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. Hence, in the instant case the Input tax credit shall be available to the applicant, only on the tax paid on services of leasing, renting or hiring of motor vehicles for providing transport facilities to women employees alone who are arriving or leaving workplace between 8.00 P.M to 6.00 A.M. as the same has been made obligatory vide the Notification of Government of Tamil Nadu cited above.
The Authority further observed that the Applicants’ submissions that the input tax credit should be permitted to be availed for the period prior to F.Y 2022-23 even though the time limit for availing ITC may have elapsed and that issuance of separate clarification through Circular No. 172/04/2022-GST makes it clear that ITC on goods and services procured for satisfaction of statutory obligation by an employer would be eligible from the time or introduction of said proviso not tenable as per provisions of the GST law.
The bench said that a circular is only clarificatory in nature and not a legislation. Whereas a notification is issued to notify the changes made in law or to give effect to provisions of law, a circular is issued to provide a clarification on an already existing provision of law. Hence, the applicants’ submission that in the instant case until the issuance of Circular more clarity was awaited on the eligibility of ITC and the ambiguity has been removed altogether only after issuance of the said circular and hence the benefit of ITC cannot be denied on procedural grounds without any fault on the part of the Applicant is not in consonance with the provisions of the GST law.
The bench ruled that the applicant is eligible to avail input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 subject to satisfying and fulfilling the eligibility and conditions provided under Section 16 of the CGST Act, 2017.
It was further ruled that the Input tax credit shall be available to the applicant only on the tax paid on services of leasing, renting or hiring of motor vehicles for providing transport facilities to women employees alone who are arriving or leaving workplace between 8.00 P.M to 6.00 Α.Μ.
The bench added that the input tax credit on leasing, renting or hiring of motor vehicles shall be available to the applicant from 28.05.2019 onwards, however the same shall be available only on satisfying and fulfilling the eligibility and conditions provided under Section 16 of the CGST Act, 2017.
Issues Raised
- In the facts and circumstances of the case, whether tax paid on input Services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 is eligible to be availed as input tax credit (ITC)?
- If eligible, can entire ITC be availed by the applicant for providing the transport facility in all shifts considering the safety of women as mandated under the Tamil Nadu Shops and Establishment Act, 19477
- If eligible, can ITC be availed for services received from the date of introduction of proviso to Section 17(5)(b)(iii) of CGST Act, 2017 for the periods up to March 2022?
Facts
The Applicant submitted that they strive to ensure diversity in employment opportunities and promotes participation of women in the workforce by providing necessary concessions and amenities and the fature of services being rendered to the customer base outside India with different time zones necessitates the applicant to operate in various shifts throughout the day.
The Applicant submitted that they are registered under the Tamil Nadu Shops and Establishment Act, 1947 for all the places of business located in Tamil Nadu. That as per the Tamil Nadu Shops and Establishment, 1947 read with the relevant rules and notifications prescribed therein, it is mandatory for the Applicant to provide transportation facility for woman employees working in shifts and provide for adequate protection of safety for women employees (hereinafter referred to as “said statutory requirement”).
Case Information
Case Name: M/s. CMA CGM Global Business Services (India) Private Limited
Judicial Level & Location : AAR, Tamil Nadu
Appeal Number : Order No. 15/ARA/2024
Date of Ruling : 15/07/2024
Ruling in favor of: Applicant
Judges: Smt. D Jayapriya, I.R.S., Member CGST and Smt. A. Valli, M.Sc., Member SGST
