Odisha AAR Ruling on ITC on Exempt Services with Charged GST – EFC Logistics Case

editor — Sat, 06 Jul 2024 06:15:51 +0000

Introduction:

The Odisha Authority for Advance Ruling (AAR), in the matter of EFC Logistics India Pvt. Ltd. (In Re: EFC logistics India (P.) Ltd., [ORDER NO. 08/ODISHA-AAR/2023-24 dated May 24, 2024]), addressed whether a recipient can claim Input Tax Credit (ITC) on exempt services where the supplier has charged GST. This ruling pertains to the applicability of GST on renting of vehicles, which is exempted under Notification No. 12/2017-Central Tax (Rate).

Facts of the Case:

EFC Logistics India Pvt. Ltd. (“the Applicant”), a Goods Transport Agency (GTA), opted to pay GST at a rate of 12% with Input Tax Credit (ITC). They intended to engage Govinda Transport Pvt. Ltd., another GTA service provider, for vehicle rental services, including fuel, tools, driver salaries, and related expenses. These services are exempt under Entry No. 22(b) of Notification No. 12/2017-Central Tax (Rate), and the supplier did not charge GST on these exempt services.

The Applicant sought an advance ruling on whether the vehicle owner (supplier) could charge GST despite the services being exempt under the notification. Additionally, they questioned whether they could claim ITC based on invoices where GST was charged.

Issue:

Held:

The Odisha AAR, in ORDER NO. 08/ODISHA-AAR/2023-24, held as follows:

The service of renting vehicles, despite being exempt, does not fall under the activities undertaken by the Applicant, hence no ruling was provided on this aspect.
According to Section 16(1) of the CGST Act, every registered person is entitled to claim ITC on supplies of goods or services used in the course or furtherance of business, subject to the conditions and restrictions specified under Section 16.
Since the Applicant pays GST under the Forward Charge Mechanism at 12%, they may claim Input Tax Credit (ITC) provided they fulfill the conditions outlined in Section 16 of the CGST Act, even if the supplier has charged GST on exempt services.

This ruling clarifies the eligibility of recipients to claim ITC on GST charged by suppliers on exempt services under specific conditions governed by the CGST Act.

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Odisha AAR Ruling on ITC on Exempt Services with Charged GST – EFC Logistics Case

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