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2019 (4) TMI 150 - AAR - GSTInput tax credit - paid on purchase of motor vehicles used in providing services of transportation of passengers or renting of motor vehicles - GST cess - Compensation Cess - Held that:- The CGST Act and Compensation Cess Act are pari-materia in nature and levy two separate taxes. i.e.. GST and Compensation Cess respectively on simultaneous basis on a supply of goods or services or both. Therefore, a particular supply of goods or services or both could be taxable under both the Legislations or could be taxable only under the CGST Act and not under the Compensation Cess Act or vice versa. As per Notification No.2/2017 - Compensation Cess (Rate} dated 28-06-2017, services of transfer of right to use any goods is liable for Compensation Cess, whereas the rental services and passenger transport services are not liable for Compensation Cess as it does not involve transfer of right to use of motor vehicles. As per Section 2(p) of the Compensation Cess Act “taxable supply” means a supply of goods or services or both which is chargeable the cess under this Act. Therefore leasing supplies are taxable supply for the purpose of Compensation Cess Act and rental business Is not regarded as taxable supply for the purpose of Compensation Cess Act as the same is not chargeable to Cess under the said Act - Compensation Cess is not chargeable on rental service, being an exempted supply. The vehicles used for rental business service are generally sold after three - four years of purchase. Therefore. the sale of vehicles being taxable supply. Compensation Cess will be attracted as the sale is effected within 5 years, of such purchases. Considering provision envisaged in Sec. 17(2) of the CGST Act / SGST Act read with Sec. 11 of the Compensation Cess Act, the petitioner is eligible to take ITC of compensation Cess paid on purchase of vehicles used for rental business and subsequently, used for effecting taxable supply by way of sale on such vehicles.
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