Claiming GST Input Tax Credit on Employee Transport Services
Companies can claim Input Tax Credit on vehicle leasing costs if providing transport to female employees is a legal requirement.
- Ruling
- Advance Ruling No. 14/ARA/2023, Dated: 15.06.2023
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Access Healthcare asked if they could claim GST credit on employee transport.
- The Authority ruled credit is allowed when transport is a legal obligation.
- Eligibility starts from the date the state mandate was officially issued.
In short
The company asked the Authority for Advance Ruling (AAR) if they could claim Input Tax Credit (ITC) on the GST paid for leasing vehicles to transport female staff. Under standard GST rules, businesses usually cannot claim credit for renting motor vehicles. However, the company argued that they are legally required to provide this transport under the Tamil Nadu Shops and Establishment Act.
What has changed
How it worked before
Many businesses assumed that GST paid on vehicle leasing was a blocked credit, meaning it could not be recovered regardless of the reason for the transport.
What has changed
The authority decided that when a state law makes it mandatory for an employer to provide transport, the GST paid on those services becomes eligible for credit. This means businesses can reduce their tax liability by claiming this credit, provided the obligation is clearly stated in local labor laws.
Who this affects
Businesses operating in states where labor laws mandate the provision of transport for female employees working night shifts.
An example
A software firm in Chennai provides night-shift transport for women to comply with local labor rules. They ask their tax consultant if they can claim the GST paid on their bus rental invoices. Based on this ruling, they may be eligible to claim the credit because the service is a legal requirement, not just a company benefit.
What you should do
If you are in a similar position, review your state's labor laws to see if providing transport is a mandatory requirement rather than a voluntary perk. Remember that an Advance Ruling only binds the company that asked for it and their specific tax officer. You should consult with your tax advisor to determine if your specific situation qualifies before claiming the credit.
If you do nothing
If you claim this credit without a clear legal mandate, a tax officer may disallow it during an audit. This would result in you having to pay back the credit plus interest and potential penalties. Do not assume this ruling automatically applies to your business without verifying your specific legal obligations.
The terms explained
- Input Tax Credit
- This is the tax a business pays on its purchases that it can use to reduce the tax it owes on its own sales.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
- Blocked Credit
- Certain expenses on which the government does not allow businesses to claim back the GST paid.
The ruling in detail
Authority for Advance Ruling
Access Healthcare Services Private Limited
Advance Ruling No. 14/ARA/2023, Dated: 15.06.2023 · Tamil Nadu
Questions before the authority
- Whether tax paid on input services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to women employees, is eligible to be availed as Input tax credit (ITC)?
- 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 with effect from 1st February 2019.
Facts
The applicant is a private limited company providing IT-enabled support services in the healthcare sector. Due to the nature of their business and international time zones, they operate in shifts and are mandated by the Tamil Nadu Shops and Establishment Act to provide transportation for women employees working between 8:00 PM and 6:00 AM. The applicant procures motor vehicle leasing services to fulfill this statutory obligation for their female staff.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility of ITC on motor vehicle leasing for women employees | Eligible Limited to transport for women employees arriving or leaving between 8:00 PM and 6:00 AM |
| Applicability date for ITC | From 28.05.2019 Subject to provisions of Section 16 of the CGST/TNGST Act, 2017 |
The Authority ruled that the applicant is entitled to avail Input Tax Credit on tax paid for leasing motor vehicles used specifically for transporting women employees during the specified night hours. This eligibility is granted because the provision of such transport is a statutory obligation under the Tamil Nadu Shops and Establishment Act. The benefit is restricted to the period starting from the date the relevant state notification was issued.
Reasoning
The Authority relied on the proviso to Section 17(5)(b) of the CGST Act, which allows ITC for goods or services where it is **obligatory for an employer** to provide them under any law for the time being in force. They determined that the Tamil Nadu Shops and Establishment Act mandates this transport for women employees. Since the specific notification mandating this was issued on 28.05.2019, the eligibility for ITC commences from that date rather than the earlier date of the general amendment to the CGST Act. The ruling also references Circular No. 172/04/2022 to confirm the applicability of the proviso.
Provisions relied on
- Section 17(5)(b) of the CGST Act, 2017
- Section 16 of the CGST/TNGST Act, 2017
- Tamil Nadu Shops and Establishment Act, 1947
- Circular No. 172/04/2022
For the practitioner
This ruling provides a **favorable precedent** for employers who are legally required by state-specific labor laws to provide transport for female employees. It clarifies that the 'obligatory' exception in Section 17(5)(b) can override the general blockage of ITC on motor vehicle leasing. Practitioners should note that the eligibility is strictly tied to the date of the specific state notification imposing the mandate.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/14_aar_2023_access_health.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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