The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s Pooja Vaishnavi School Bus Services has deliberated on the distinction between ‘transportation of passengers’ and ‘renting of motor vehicle’ and has ruled that GST is applicable on the hiring of Non-AC buses to Company for Transport of Staff as same is renting of motor vehicle services.
Facts of the Case:
The applicant, Shailesh Ramsunder Pande is a proprietor of M/s Pooja Vaishnavi School Bus Services entered into a contract with M/s Rattan India Power Limited (RIPL) for the supply of NON AC Buses for transportation of their staff under contract carriage.
The applicant has sought clarification on the applicability of GST on the contract of supplying Non- Air Conditioned (“Non-AC”) Buses and whether the exemption is available for stated service under SI No. 15 Heading 9964 of Notification No. 12/2017 – Central Tax (Rate) dated 28th June 2017 is applicable in the case.
It may be noted that as per Sl. No 15(b) of above Notification, Transport of passengers, with or
without accompanied belongings, by non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; is an exempted supply.
Order of AAR: Deliberation and Ruling
The AAR observed that it is RIPL that controls the deployment of the buses. A perusal of the agreement reveals that the applicant shall deploy the buses (already inspected by RIPL) or as per instructions of the Admn. Dept of RIPL. Thus the applicant cannot run the buses on their own because the overall control of the buses is with RIPL.
Further, the AAR noted that as per the agreement, Insurance Charges, etc., will be paid by the applicant whereas toll tax, etc will be paid by RIPL. Thus while the ownership of the buses lies with the applicant, the buses shall be operated strictly as per the instructions of RIPL. Therefore in the subject case, there is a clear transfer of right to use the buses by way of effective control as is seen from the fact that the buses are plying strictly as per RIPL’s instructions.
The AAR stated that in the case of transportation of passengers, the recipient of service would be the passenger whereas in the case of renting any motor vehicle, like buses in the subject case, the recipient would not be the passenger. In the subject case, the consideration for the supply of service is charged from RIPL and not the passenger. Therefore in the subject case, it is clear that the recipient is RIPL.
The Coram of members Rajiv Magoo and T.R . Ramnani ruled that we have no hesitation in holding that the subject activity, amounts to ‘renting of a motor vehicle’ and shall qualify as a taxable activity under the provisions of the GST Laws. Since the subject activity is not ‘transportation of passengers’ as discussed, the provisions of notification no. 12/2017 Central Tax (Rate) dated 28.06.2017 is not applicable in the subject case.
In other words, the AAR held, that the impugned service is “rent-a-cab” service which attracts IGST @ 5% if Input Tax Credit of input service in the same line of business has not been taken or IGST @12% if ITC is availed.
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CA. Mohammad Salim is an ICAI award winning Chartered Accountant having rich experience of more than 20 years in the field of indirect taxes. He is the Member, Indirect Taxes Committee of PHD Chamber of Commerce and Industry. He is author of four successful books on GST published by Taxmann Publication and is also GST expert on taxmann portal.
