[2019] 104 taxmann.

com 86 (AAR - MADHYA PRADESH)

AUTHORITY FOR ADVANCE RULINGS, MADHYA PRADESH

Narsingh Transport, In re*
RAJIV AGRAWAL AND MANOJ KUMAR CHOUBEY, MEMBER
CASE NO. 25 OF 2018
ORDER NO. 02 OF 2019
FEBRUARY  18, 2019 

RULING
 
(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya
Pradesh Goods & Service Tax Act, 2017)
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and MP
Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and MPSGT Act respectively)
by M/s. Narsingh Transport, Indore (hereinafter referred to as the Applicant), registered under the Goods
& Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions.
Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act
would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the
purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST
Act would be mentioned as being under the GST Act.
3. BRIEF FACTS OF THE CASE:
3.1 The Applicant is registered with the Department having for providing "Goods Transport
Agency Service" it is availing option to pay tax @12% and availing ITC facility on vehicle and
their spares used for providing GTA service as well as on inward services namely insurance of
vehicles and repair and maintenance of vehicles. The applicant has recently purchased cars and has
provided them to various companies on lease rent under a Lease Agreement entered between them on
monthly basis for their use in furtherance of their business. The applicant while purchasing the cars for
their business purpose i.e. for providing to other companies on a monthly lease rent under a lease
agreement has paid GST as applicable.
4. QUESTIONS RAISED BEFORE THE AUTHORITHY :—
The following questions have been posted before the Authority:—
1. The applicant desire the advance ruling on the subject that whether the GST paid on these cars
provided to their different customers on lease rent will be available to it as INPUT TAX CREDIT(ITC)
in terms of Section 17(5) of Central Goods and Service Tax Act, 2017.
5. DEAPRTMENT'S VIEW POINT:
The concerned officer of SGST gave following view on the issue —
The applicant is entitled to avail ITC on vehicles which are further supplied to customers on lease rent,
subject to condition applicable as per section 17(5) of CGST Act, 2017, Madhya Pradesh Goods and
Services Tax Act, 2017 and notification number 11/2017 central tax (Rate) dated 28 June, 2017, State
notification No. F-A-3-32-2017-1-V(41) dated 29 June, 2017 read with amendments.
Such vehicle must be registered for Commercial use and Permit holder as per section 66 under
Motor Vehicle Act, 1988.
6. RECORD OF PERSONAL HEARING:
6.2.1 The applicant is providing "Goods Transport Agency Services" and is charging GST on outward
supply of goods transport agency service @ 12 %.
6.2.2 The inward supply of the goods and services on which full ITC is being claimed by the applicant is
as under:

(i)   Maintenance & Repair service Bills- Maintenance & repairing service is being used
for smooth running of vehicles meant for providing GTA service
(ii)   Spare & accessories Bills - Goods purchased for maintenance of vehicles.
6.3 Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect
of the aforesaid question(s)
As per Section 16(1) of CGST Act, every registered person shall subject to such conditions and
restrictions as may be prescribed and in the manner specified in Section 49, be entailed to take credit of
input tax charged on any supply of goods or services or both to him which are used or intended to be
used in the course of furtherance of his business and the said amount shall be credit to the electronic
credit ledger of such person.
The availability/non-availability of input tax credit is governed by Section 17(5) of Central Goods &
Service Tax Act.2017. Section 17(5) envisages the conditions for input tax credit on motor vehicles
under the said section.
Section 17(5) of Central Goods & Service Tax Act.2017 provides that input tax credit in respect of the
following shall not be available.

(a)   Motor vehicle and other conveyances except when they are used

(i)   For making the following taxable supplies, namely -

(A)   Further supply of such vehicles or conveyances; or

(B)   Transportation of passengers; or
(C)   Imparting training on driving, flying, navigating such vehicles or conveyances;
(ii)   For transportation of goods;

(b)   the following supply of goods or services or both-

(i)   Foods and beverages ....................................or mixed supply.

(ii)   Membership of club, health and fitness

centre
(iii)   Rent-a-cab,.....................
'(c)   work contract ..................supply of work contract services.

(d)   Goods or services .....................of

 furtherance of business.
(e)   goods or services ....................
(f)   goods or services..................
(g)   goods or services or both used for personal
consumption.'
One of the eligibility is "motor vehicle used for making a taxable supply namely".
Further supply of such vehicle or conveyance; or .............". Following the above in its true letter and
spirit the applicant who has purchased cars after paying GST for the purpose of renting (under monthly
lease agreement between applicant & their customers) out for further use in furtherance of their business
is correctly entitled for input tax credit of GST paid by applicant.

(i)   The applicant is a registered service provider under GST Act.

(ii)   The motor vehicles (cars) purchased have suffered GST at applicable rate.
(iii)   The applicant will not claim depreciation on these vehicles under Income Tax
Act.1961
(iv)   The vehicles purchased are further supplied for making a taxable supply/service
namely lease rent supply/lease rent service for furtherance of their business.
6.4. Hence, the conditions prescribed under Section 17(5) (a) (i) (A) applicable to its case are fully
satisfied making them entitled for credit.
7. DISCUSSIONS AND FINDINGS:
7.1 We have carefully considered the submissions made by the applicant in the application, the pleadings
on behalf of the Applicant made during the course of personal hearing. We find that the issue raised in
the Application is squarely covered under Section 97(2)(d) of the CGST Act 2017 being a matter related
to 'admissibility of input tax credit paid or deemed to have been paid', and the applicant has complied
with the all the requirements for filing this application as laid down under the law. We therefore admit
the application for consideration on merits.
7.2 We find that the Applicant is basically registered with for providing 'Goods Transport Service' and
admittedly discharging GST liability on such services @12% Adv. availing input tax credit (hereinafter
referred to as ITC). The Applicant has recently purchased cars and the same have been provided to
various Companies on lease rent under a lease agreement. The applicant has expressly purchased such
cars for furtherance of their business i.e. for providing to other entities on a monthly lease rent under
proper lease agreement.
7.3 The applicant has made this application seeking ruling on a limited question, 'Whether the GST paid
on these cars provided to different customers on lease rent will be available to the applicant as Input
Tax Credit in terms of Section 17(5) of the Central Goods and Services Act 2017.'
7.4 The whole issue revolves here around the "Input Tax Credit" issue so at the very first instance we
find it suitable to draw attention towards the provisions relating to Input Tax Credit under GST regime
having an impact on the issue raised and to be answered, which read as under:-
Section 16. Eligibility and conditions for taking input tax credit.—(1) Every registered person shall,
subject to such conditions and restrictions as may be prescribed and in the manner specified in section
49, be entitled to take credit of input tax charged on any supply of goods or services or both to him
which are used or intended to be used in the course or furtherance of his business and the said amount
shall be credited to the electronic credit ledger of such person.
Section 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1)
of section 18, input tax credit shall not be available in respect of the following, namely :—
1. After GST Act amendment 2018 —
(a) motor vehicle for transportation of person having approved seating capacity of not more then
thirteen person(including the driver), except when they are used for making the following taxable
supplies, namely:—

(A)   further supply of such motor vehicles; or

(B)   transportation of passengers; or

(C)   imparting training on driving such motor vehicle;
  (aa)** ** **
2. Before the above amendment
(a) motor vehicles and other conveyances except when they are used —

(i)   for making the following taxable supplies, namely :—

(A)   further supply of such vehicles or conveyances; or

(B)   transportation of passengers; or
(C)   imparting training on driving, flying, navigating such vehicles or conveyances;
(ii)   for transportation of goods;
7.5 A plain reading of the above referred relevant portion of the Sections make it absolutely clear that in
respect of motor vehicles, except in certain circumstances, the Input Tax Credit is not available. These
exceptional situations are enumerated in the Sub Section 5(a) after the amendment and sub section 5(a)
(i) and (ii) before the amendment . In the present case before us is that the Applicant is providing cars on
Lease Rent to their customers for carrying passengers and hence not covered by the exception as
provided in clause (B) and (C) of sub section 5(a) after the amendment and in clause (B) and (C) of sub
section5(a)(i) before the amendment as well as in Sub section 5 (a) (ii) of Section 17 before the
amendment. The sub section 5 (a) (i) reads as "for making following taxable supplies namely" and sub
section 5(a)(A) after the amendment /5(a)(i) (A) before the amendment, reads as "further supply of such
vehicles or conveyances".
7.6 The words "taxable supply" & "further supply" finding a place in the said sub-sections are of great
importance here and therefore we find it necessary to draw the attention towards their literal and legal
meanings in the GST regime. The term "supply" has been categorically defined under Section 7(1)(a) of
the CGST Act 2017 which reads as under—
Section 7. Scope of Supply :- (1) for the purpose of this Act, the expression "supply" includes -

(a)   All forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business.
7.7 Thus the term 'Supply' is wide in its import and includes all forms of supply of goods and/or services
such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to the made for a
consideration by a person in the course or furtherance of business. Similarly a "taxable supply" means a
supply of goods and/or services which is chargeable to goods and service Tax under the GST Act.
7.8 It is pertinent to mention here that the taxable event under GST is the supply of goods and/or
services made for consideration in the course or furtherance of business. In order to constitute a supply
"the essential elements required to be satisfied are in the nature of (i) supply of goods and/or services,
(ii) supply for a consideration, (3) supply made in the course or furtherance of business (iv) supply made
in taxable territory, (v) supply a taxable supply and (vi) supply made by a taxable person. Now on
applying the principals laid down by the law, as highlighted above, to the facts of the instant case as also
reflecting in the Lease Agreement entered between the Applicant and its customer, we find that -

(i)   Applicant is supplying goods i.e. cars and services i.e. lease rent services,
(ii)   the supplies are against a monthly monetary consideration
(iii)   the supplies are in the course of applicant's business
(iv)   the supplies are effected in taxable territory
(v)   supplies are taxable in nature and
(vi)   Applicant is registered under GST Act
Thus we find that the activities carried out by the applicant are in the nature of "taxable Supply".
7.9 Now we come to the moot question to be answered in the issue at hand. Whether this "taxable
supply" made by Applicant satisfies the exception situation provided in subsection 5(a) (i) (A) before the
amendment and subsection 5(a)(A) after the amendment to make it eligible for availment of Input Tax
Credit on Motor vehicle i.e. cars, purchased and then provided to their customers under Lease Rent
Agreement? The above mentioned sub section mentions about making of "further supply" of such
vehicles or conveyance and hence the deciding factor would be the term "further supply". We observe
that the term "further supply" has not been defined in the Act, therefore one has to go by definition of
"supply" which is the very plinth of GST law. The term 'further' prefixed to 'supply' is merely in the form
of adverb and does not differentiate it from 'Supply" by any stretch of imagination.
7.10 In the light of the facts as discussed in details in previous paras, the activities carried by the
Applicant regarding supply of tax paid motor vehicles on monthly ease rent plus Goods & Service Tax
as applicable to their customer under a proper agreement properly satisfies the conditions laid down
under Section 17(5) (a) (i) (A) before the amendment and under subsection 5(a)(A) after the amendment
to make it eligible for availment of input tax credit on motor vehicle for the Tax paid by it while
acquiring the said vehicles.
7.11 We also find it necessary to mention here that the cars, which the applicant intends to lease, or has
already leased, should be registered with the transport authority in the capacity of commercial use. In
case the vehicle is owned and used by the Applicant for his own use, the facility of ITC shall seize to be
available to them.
RULING
(Under section 98 of Central Goods and Services Tax Act, 2017 and the Madhya Pradesh Goods
and Services Tax Act, 2017)

1.   The Applicant is entitled to avail ITC on cars (passenger vehicles) which are further
supplied to customers on lease rent, subject to condition applicable in such supply of
services as per notification number 11/2017-Central Tax(Rate) Dated 28.06.17 as
amended from time to time and corresponding notifications issued under MPGST
Act.
2.   The provision of rule 42 shall also be applicable if required so.
3.   At the termination of lease agreement/contract, if the vehicle is not further leased to
 same or other customer, the applicant shall be liable to reverse the ITC so availed as
per law.
4.   Such vehicles should abide by the norms and regulations of The Motor Vehicle Act.
in accordance to be registered for commercial use with the Transport authority and
not put to own use by the Applicant.
5.   This ruling is valid subject to the provisions under section 103(2) until and unless
declared void under Section 104(1) of the GST Act.
.