One of My client providing Services named Renting of any Motor vehicle to carry passengers where the cost of fuel is included in the consideration charged from the service recipient comes under HSN code 9966 and charging 5% GST under Notification no,11/2017 - Central Tax (Rate). My query is whether 1) If my client purchases any Bus or passenger Vehicle then he is entitled to take input credit on GST paid on vehicle. 2) whether recipient company is entitled to take input credit on GST charged by us on services provided by us. 3) if we charge 12% GST under same notification no. then whether we will be eligible to take credit on Vehicle Purchased by us and on the other hand the recipient company is entitled to take inpur credit on GST charged by us. 4) can we change the GST rate from 5% to 12% in the middle of financial year.5) Presently we are charging 5% GST and we are also taking services of sub contractor who is providing vehicles to us on Rent charging GST @18% can we take input on this. Thanks in Advance

Reply— Where a taxpayer is charging 5% GST on Renting of motorcab where the cost of fuel is included in the consideration charged from the service recipient, he is not entitled to claim input tax credit charged on goods and services used in supplying the service.

1) Therefore, your client cannot take ITC on purchase of passenger vehicle.

2) Restriction for taking input tax credit is only for supplier of service, recipient can take input tax credit. However  ITC is not available on buses/ cars hired for transportation of employees.

3)  Yes, where a supplier is charging 12% GST, he can take input tax credit on goods and services used in supplying the service.

4) The option Once exercised can not be withdrawn during the remaining part of financial year. 

5) Since you are charging 5% GST on outward supply, you cannot take input tax credit.