AAR Update | Classification of service of transportation of employees through buses and cabs

This is to apprise you on the recent Karnataka Authority for Advance Ruling (‘AAR’) in the case of Sharma Transports, 2019-VIL-360-AAR.

In this case, the Applicant was rendering employee transportation service to its clients by using its own buses. The responsibility of operation and maintenance of buses was of the Applicant. The Applicant operated buses for commutation of clients’ employees over a pre-determined route and schedule.

The question before the AAR was whether such service falls under passenger transport service under SAC 9964 or renting of transport vehicle to carry passengers under SAC 9966.

The AAR relied on Explanatory Notes of Classification of Services and observed that SAC 9964 covers passenger transportation services over pre-determined routes on a pre-determined schedule for specific segment of users. Basis this, the AAR held that the service provided by the Applicant qualifies to be ‘Passenger Transport Service’ under SAC 9964.

NITYA Comments: While the ruling deals with classification of services, this support our earlier stand for availing Input Tax Credit (‘ITC’) on passenger transportation service as discussed in our update mentioned in trail mail. As discussed therein, ITC is restricted on rent-on cab service only and not on passenger transportation service. Therefore, ITC is available where vehicles are used for commutation of employees over a pre-determined route and schedule.