Tax experts said the ruling would hurt e-rickshaw operators, who are often small businesses with no scope to utilise the input tax credit (ITC) in lieu of taxes paid on tyres.
Tyres used in e-rickshaws attract the peak goods and services tax (GST) rate of 28%, the Authority for Advanced Ruling (AAR) in Maharashtra said. The ruling dismissed the argument of the applicant, CEAT, that such tyres should be taxed at 5%, as is the case with tyres of ‘three-wheeled powered cycle rickshaw’. The applicant argued that the GST tariff schedule doesn’t specifically mention rates for e-rickshaw tyres, but has kept the rate of tyres meant for ‘three-wheeled powered cycle rickshaw’ at 5%. The applicant has been charging 5% GST on sale of such tyres based on the tariff schedule, which mentions tyres and tubes used in bicycles, cycle-rickshaws and ‘three-wheeled power rickshaws’ under 5% GST.
Tax experts said the ruling would hurt e-rickshaw operators, who are often small businesses with no scope to utilise the input tax credit (ITC) in lieu of taxes paid on tyres. “Taxing e-rickshaw tyres at 28% against a rate of 5% which is notified for manual rickshaw tyres seems to be a little harsh and goes against the public policy. E-rickshaw pullers operate below the threshold limit for GST registration and thereby they would not be able to claim any input tax credit resulting into an additional tax of 23%, hitting there earnings directly,” Rajat Mohan, partner, AMRG & Associates, said. The applicant argued that like items should be treated similarly, and goods of the same kind should be clubbed and treated at par in terms of the tax rate. “Extending the same principle to e-rickshaws, it is submitted, that e-rickshaws should be treated as similar to ‘three-wheeled powered cycle rickshaws’ in law and clubbed with the same for the purpose of taxation under GST,” the applicant said.
The authority, however, disagreed with the argument stating that while e-rickshaws are powered solely by an electric motor, powered rickshaws can be peddled if need be, although it can be fitted with motor to assist the driver. The authority also pointed out that size of tyres and tubes used in e-rickshaws are also widely used in scooters and motorcycles. Additionally, the authority said the distinction between two vehicles is established from the fact that unlike powered rickshaws, e-rickshaws is classified as motor vehicle under ‘Motor Vehicle Act’ and they need to be registered with local transport authority. “The product is classified and covered by Tariff Heading 4011 and the rate of tax shall be at the rate of 14% under MGST Act, 2017 and 14% under CGST Act, 2017,” the ruling said.