Hiring cabs to pick/drop staff? Cannot claim ITC on GST

According to AAR, unless arranging transportation facility for staff is a service made obligatory by law, employers cannot claim ITC on GST

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According to the Himachal Pradesh bench of the Authority for Advance Ruling (AAR), input tax credit (ITC) for GST cannot be claimed by any company on hiring vehicles to transport their staff to and from work, unless it is an obligatory service under law.

The GST law was cited by AAR in response to an application filed by the Prasar Bharti Broadcasting Corporation (All India Radio), Shimla, seeking to find out whether ITC can be claimed on hiring cabs or taxis to pick and drop employees, including women and those with disabilities, at odd hours. The broadcasting service uses hired taxis for tour/OB recordings with the state.

It was pointed out by AAR that as per GST law, ITC can be claimed only if “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”.

According to Rajat Mohan, senior partner, AMRG & Associates, the Himachal Pradesh AAR has limited the tax credit on services of hiring commercially-licensed vehicles for picking up and dropping of employees. This means, businesses cannot avail tax benefits on hiring vehicles to pick up or drop staff members, even their women employees or those employees with disabilities.

This will not only impact the perks employees receive on account of transportation, but will also hike the income tax imposed on such additional costs incurred by businesses.

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