Claiming GST Input Tax Credit on Employee Transport Services
Companies can claim Input Tax Credit on vehicle leasing costs for transporting women employees only when state law mandates such safety measures.
- Ruling
- Advance Ruling No. 18/ARA/2026, dated 04.03.2026
- Dated
- 04 Mar 2026
- 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
- AGS Health asked if GST on vehicle leasing for employee transport is creditable.
- The Authority ruled credit is allowed if the transport is a legal mandate.
- Credit is restricted to transport for women employees between 8 PM and 6 AM.
- Eligibility for this credit began on May 28, 2019.
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 staff. Under the Tamil Nadu Shops and Establishments Act, 1947, the company must provide safe transport for women working night shifts. The dispute centered on whether this legal requirement allows the company to bypass the general rule that blocks ITC on motor vehicle rentals.
What has changed
How it worked before
Businesses were often unsure if the legal requirement to provide transport for women employees overrode the general GST restriction on claiming credit for vehicle rentals.
What has changed
The Authority confirmed that when a law forces an employer to provide transport, the GST paid on those services is eligible for credit. However, this is not a blanket rule; it only applies to the specific hours mandated by law, such as night shifts for women employees. In practice, you cannot claim credit for daytime transport if the law only mandates safety measures for night hours.
Who this affects
IT companies, manufacturing units, and any business operating night shifts that are legally required to provide transport for women employees.
An example
A software firm in Chennai operates a 24/7 office and provides cabs for all staff. They want to claim ITC on all cab invoices. Based on this ruling, they can only claim ITC for the cabs used by women employees during the night shift hours specified in the Tamil Nadu Shops and Establishments Act. They cannot claim credit for cabs used by male employees or for transport provided during the day.
What you should do
Review your state's specific labor laws to see if you are legally obligated to provide transport. If you are, you may claim ITC for those specific hours. Remember that an Advance Ruling only binds the company that asked for it and their specific tax officer; it is not a universal law that applies to your business automatically.
If you do nothing
If you claim this credit without a clear legal mandate, your local tax officer may disallow the claim during an audit. You would then be required to pay back the credit along with interest and potential penalties. Do not assume this ruling covers your specific situation without consulting your own tax advisor.
The terms explained
- Input Tax Credit (ITC)
- 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 written decision from tax authorities on how GST laws apply to a specific business situation.
- Statutory Mandate
- A requirement or duty that is explicitly written into a law or government regulation.
The ruling in detail
Authority for Advance Ruling
M/s. AGS HEALTH PRIVATE LIMITED
Advance Ruling No. 18/ARA/2026, dated 04.03.2026 · Tamil Nadu
Questions before the authority
- In the facts and circumstances of the case, whether tax paid on Input services in respect of leasing/renting/hiring of motor vehicles to provide transportation facility to ensure safety and security of women employees as per Tamil Nadu Shops and Establishments Act, 1947 is eligible to be availed as input tax credit (ITC)?
- If eligible, can entire ITC be availed by the applicant for providing the transport facility in all shifts considering the safety of women as mandated under the Tamil Nadu Shops and Establishments Act, 1947?
- 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?
Facts
The applicant is an ITES company operating in multiple shifts to serve international clients. Under the Tamil Nadu Shops and Establishments Act, 1947, they are mandated to provide transportation for women employees working in shifts to ensure their safety. The applicant seeks to claim Input Tax Credit (ITC) on the GST paid for leasing motor vehicles used for this purpose.
Ruling
| Question | What the authority ruled |
|---|---|
| Eligibility of ITC on vehicle leasing for women's safety | Yes, eligible Subject to satisfying conditions under Section 16 of the CGST Act, 2017 |
| Scope of ITC for all shifts | Only for women employees arriving or leaving between 8:00 PM and 6:00 AM Limited to the mandate under the Tamil Nadu Shops and Establishments Act |
| Applicability from date of introduction | Available from 28.05.2019 Subject to Section 16(4) time limits |
The Authority ruled that the applicant is eligible to claim ITC on the GST paid for leasing motor vehicles used to transport women employees, provided the conditions under Section 16 of the CGST Act are met. However, this eligibility is restricted to transportation services for women employees arriving or leaving the workplace between 8:00 PM and 6:00 AM. The ITC is available from 28.05.2019, subject to the statutory time limits for claiming credit.
Reasoning
The Authority relied on the proviso to Section 17(5)(b) of the CGST Act, 2017, which allows ITC where it is obligatory for an employer to provide services under any law for the time being in force. It referenced Circular No. 172/04/2022-GST to clarify that the proviso applies to the entire clause (b) of Section 17(5). The ruling emphasizes that the mandate under the Tamil Nadu Shops and Establishments Act, 1947, specifically pertains to the safety of women employees during night hours. Consequently, the credit is restricted to the specific hours where the statutory obligation exists.
Provisions relied on
- Section 16 of the CGST Act, 2017
- Section 17(5)(b) of the CGST Act, 2017
- Circular No. 172/04/2022-GST
- Tamil Nadu Shops and Establishments Act, 1947
For the practitioner
This ruling confirms that employers can claim ITC on employee transportation costs if such transport is a **statutory mandate** under state law. Practitioners should note that the credit is **strictly limited** to the specific hours or conditions mandated by the relevant state legislation. It does not grant a blanket right to claim ITC for all employee transportation.
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/3-ags_health_care_aar_order.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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