Blogs

Blogs

Blogs

Articals that are worth reading

input tax credit under gst

Admissibility of Input Tax Credit - Motor Vehicles

8 Aug,2019

1. Introduction

Seamless flow of input tax credit was the core purpose of the GST law after subsuming all the indirect taxes. Here, the admissibility of credit on motor vehicles has emerged as the burning issue and still in infant stage §ng there is diversity in the provision of the law and the decision being given by Authority for Advance Rulings.

2. Legal provisions

The relevant provision related to the issue under consideration is as under

 "Section 17 - Apportionment of credit and blocked credits.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be Unavailable in respect of the following, namely:

[(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely

1. further supply of such motor vehicles; or

2. transportation of passengers; or

3. imparting training on driving such motor vehicles 

(aa) vessels and aircraft, except when they are used -

1. for making the following taxable supplies, namely

  1. further supply of such vessels or aircraft; or

  2. transportation of passengers; or

  3. imparting training on navigating such vessels; or

  4. imparting training on flying such aircraft;

2. for transportation of goods;

   (ab) services of general insurance, servicing, repair and maintenance in so far as they        relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

Provided that the input tax credit in respect of such services shall be available --

  (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

  (ii) where received by a taxable person engaged —

  • in the manufacture of such motor vehicles, vessels or aircraft; or

  • in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;"

3. Facts of the case

The assessee was engaged in supplying cabs on rental basis for the purpose of transportation of passengers. It was further submitted that as people take the car on rent for the transportation of 

passengers, therefore, the services though claimed as "rent-a-cab" services but it is closely and essentially associated with transportation of passengers and hence, on reading of the provision as cited above the credit of tax paid on the purchase of motor vehicles is admissible to it

4. Discussion

While discussing the matter, it was stated by the Authority for Advance Rulings that the GST Act has been amended with effect from 1-2- 2019 and before amendment the provisions of section 17(5)(b)(iii) of the Act did not allow credit of GST paid on inputs for supply of rent-a-cab service, except under certain specific conditions that are not applicable in the this case. It ruled out credit of input tax paid on the purchase of motor vehicles used for supply of rent-a-cab service if the transaction was effected before 1-2-2019

It further stated that the amended provisions of section 17(5)(b)(iii) of the GST Act do not contain reference to the rent-a-cab service. However, post-amendment, input tax credit shall not be available in respect of supply of the service of renting or hiring of motor vehicles in terms of section 17(5)(b)(i) of the GST Act, unless the inward and the outward supplies are of the same category, standalone or as an element of a taxable composite or mixed supply. Further, section 17(5)(a) of the Act provides that input tax credit shall not be available on inward supply of motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely - 

1. a further supply of such motor vehicles; or

2. transportation of passengers: or

3. imparting training on driving such motor vehicles.

It was further discussed that "rent-a-cab" is not defined in the GST Act and therefore, the nature of services has to be identified from the invoices and the related facts. The assessee provides cab rental service to various institutions and in no case such services provided to institutions can fall under "passenger transportation services". From the facts, it was further’ inferred that the service receiver has to pay the assessee a certain amount per month as consideration, irrespective of what distance the cab travels in a particular month. Additional amount has to be paid if the cab is retained for extra hours or requisitioned on holidays. For the purpose of covering the cost of fuel, the distance travelled needs to be brought into play, but only if it crosses a certain threshold.

It is, therefore, clear from the above discussion that the nature of the service the assessee provides is classifiable under SAC 9966 as renting of a motor vehicle.

5. Conclusion

In view of-the facts and the legal provisions stated above, it was held by the Authority for Advance Rulings that the credit of GST paid on purchase of motor vehicles or other inputs for the supply of the "rent-a- cab" service is not admissible.

6.Author's views

With due respect, the author of this article differs with the decision passed by the Authority for Advance Rulings in the above-mentioned case. The author wishes to throw light on the provision mentioned in section 17(5)(a)(A) of the CGST Act, 2017, wherein it was said that the credit of tax paid on motor vehicles is admissible where it is used for further supply of such motor vehicle. As the words highlight, it is very clear that the credit of tax paid on motor vehicle is admissible if the same is used in further supply. It is worthwhile to note that the term "supply" has its significance and from reading the meaning of supply as given to it in section 7 of the CGST Act, 2017, it is very widely interpreted to include all sorts of supply, service or sale including renting, leasing, etc.

Thus, where "rent-a-cab" is included in the meaning of the term "supply", and renting of motor vehicles is the further supply of such motor vehicles, hence, the conditions mentioned in section 17 are fulfilled in favour of admissibility of input tax credit to the assessee of tax paid on such motor vehicles. Hence, the above decision needs reconsideration in light of the provisions cited above.


Finding it difficult to understand? We are here to help. Contact ADCA - One of the reputed GST Consultants In Bangalore - for the complete assistance.

income tax on pension

Reporting a pension income in the IT form

23 Jul,2019

Income tax is applicable for people who make their ends meet through their pension. A pension is a regular payment made by the state to people of or above the official retirement age and to some widows and disabled people. Also, if a salaried individual is retired from employment, typically because of age or ill health, then a pension is paid to them.

Income Tax Form for Pensioners

The Government of India has notified four Income Tax returns forms which are applicable to Hindu Undivided Family (HUF) and individual.

  • Form No. ITR 1: Also popularly known as Sahaj (easy), this form can only be filed by an individual assesse. It is vital to take note that this form can only be used by an individual who has salary as his/ her source of income and not any business enterprise owned by him/her.

  • Form no. ITR 1 is a means by which pensioners can file their income tax returns. This form is also used by majority of salaried taxpayers who own a single house and have their income which is taxable (i.e. income from other sources) in addition to their pension.

For individuals who are receiving pension: 

Where the individual receives pension income from the fund to which contributions are made by employer, in case of ITR 2, under the salary schedule, the individual has to report the name, address and tax deduction and collection account number (TAN) (mandatory only if tax is withheld on pension) of the employer/LIC/any other fund. Also, the individual will have to select 'pensioners' as a category in the field for nature of employment in the salary schedule. 

Commuted pension beyond the limits exempt under the Act and the entire uncommuted pension, should be reported as "Commuted pension" or "Annuity or pension" under 'salary under section 17(1)' of the Act as taxable. The commuted pension which is exempt from tax should be entered in the field "Commuted value of pension received under section 10(10AA)" selected from the dropdown available under "Allowances to the extent exempt under section 10". The reporting of commuted and uncommuted pension in ITR 1 remains the same as ITR 2 except, while reporting the pension income, there is no requirement for the individual to enter name, address of the employer, also this income is to be directly reported under section 17(1) without selecting "Commuted pension" or "Annuity or pension" as applicable under ITR 2. 

Where the individual receives the pension from LIC/any other approved fund out of the contributions made by the individual from his own funds, he/she needs to report uncommuted pension under section "Any other income" of the schedule "income from other sources". Commuted pension, if any, will have to reported under the schedule "Exempt income" as "any other" in ITR 1 and as "any other" under the point "Other exempt income" in ITR 2.

Family members who are earning pension: 

Family members who are earning pension will have to report the same under 'Any other income earned' in the other sources schedule in ITR 2. 

For ITR 1, the individual will have to select 'Family pension' from the drop-down under Income from other sources.

Courtesy – economic times

tds

Payment for Maintenance Services - Whether Liable for TDS under Section 194C or Under Section 194J

3 Jul,2019

1. Payment when liable to TDS under section 194C

Tax under section 194C is deducted where any sum is paid to any resident contractor for carrying out any work in pursuance of a contract between the contractor and the specified person

As per clause (iv) of the Explanation to section 194C, “work" shall include: - 

1. advertising.

2. broadcasting and telecasting including production of programs for such broadcasting or telecasting.

3. carriage of goods or passengers by any mode of transport other than by railways.

4. catering

5.  manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer

2. Payment when liable to TDS under section 194J

Section 194J provides for deduction of tax at source from payments of fees for professional services, technical services, royalty or sums referred to in section 28 (va) like non-compete fee, etc.

3. Nature of payment made for maintenance services

As clarified via CBDT Circular No. 681, dt. 8-3-1994 Service contracts would be covered by the provisions of this section since service means doing any work as explained above. However fees for technical services is governed by section 194J.

As per Circular No. 715, dt. 8-8-1995 routine, normal maintenance contracts which include supply of spares will be covered under section 194C. However, where technical services are rendered, the provision of section 194-J will apply in regard to tax deduction at source

Therefore one has to differentiate between routine services and technical services while ascertaining the applicability of TDS provision.

4. Payment for maintenance of machinery where held to be covered by section 194C

In ITO v. Maharashtra Pollution Control Board 2016 TaxPub(DT) 4437 (Mum-Trib)  It was observed that repairs and maintenance and quality monitoring services, etc., provided under an annual maintenance contract (AMC) in Relation to machinery, were not of technical nature and were not covered under section 194J. Being contractual work, assessee was liable to x under section 194C.

Merely because technical persons were involved in rendering the services relating to maintenance, of installed machines it could not be inferred that these services were technical or professional in nature liable to TDS under section 194J. Therefore, tax was liable to be deducted under section 194C, and not under section 194J.—Vide Facets Polishing Works (P) Ltd. V. ITO (2015) 69 SOT 361 (Ahd V'-Trib).

In ITO Mumbai Metropolitan Regional Development Authority (2015) 40 ITR (Trib) 60 (Mum ‘B'-Trib): (2015) 155 ITD 314 (Mum 'B'-Trib). It was held that annual maintenance contract services related to minor repairing, replacement of spare parts, oiling, greasing, etc., would not fall Category of technical services and therefore, the payment made by assessee towards them was not subjected to TDS under section 194J. Also see, Dy.CIT v. Asian Heart Institute & Research Centre (P) Ltd. (2015) 173 TTJ (MUM 'A'-Trib) 832.

An assessee entered into a contract with the government department for repairing and servicing typewriter and other machines in government offices at periodical intervals and certain specified rates. The above contract was held to be a work contract—Vide Eastern Typewriter Service v.State of Andhra Pradesh (1978) 42 STC18 (AP).

Annual maintenance charges paid towards services of repetitive nature not requiring very high technical qualification, were subject to TDS under section 194C and not under section 194J Vide SBI Life Insurance Co.Ltd. v.Dy. CIT2016 TaxPub (DT) 4958 (Mum-Trib).

5. Payment for rendered towards maintenance of medical equipments

In CIT v Saifee Hospital 2019 TaxPub (DT) 2050 (Bom-HC) the supplier of medical equipments to the assessee hospital had also rendered services of maintenance of these equipments. The assessee deducted tax under section 194C while making payment for maintenance services. However, the departmental authorities sought deduction of tax at source under section 194J.

The Tribunal in respect of the same assessee in earlier year held that the services which are rendered for maintenance of equipment would not be in the nature of technical services. These services being of routine nature, would not be qualified to be called technical services which would require deduction under section 194J of the Act. Purpose of these services was only to ensure the proper maintenance of the machinery/equipment so as to ensure long life for the same. Thus impugned payment would be covered under section 194C for being made for work contract

6. Conclusion

Where the services rendered in respect of the machinery and equipment are only in nature of maintenance services provided to ensure they function properly and would be able to provide services for a long period of time. This does not involve any technical service. Hence payment for routine maintenance services would be liable for TDS under section 194C instead of section 194J.

 

Have Any Question? We Can Help You..

Call Us +91 80-2572 4815