Rent a Cab Service under RCM
Central Government, on the recommendations of the Council, hereby makes the amendment in the services of renting of motor vehicle.
Extract of Notification No. 22/2019-Central Tax (Rate) dated 30th September 2019
After serial number 14 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely: –
| (1) | (2) | (3) | (4) |
|---|---|---|---|
| 1. | Services provided by way of renting of a motor vehicle provided to a body corporate. | Any person other than a body corporate, paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business | Any body corporate located in the taxable territory. |
Analysis of notification: –
This amendment has come into force from 01.10.2019
| Services | Service Provider | Service Receiver | RCM Applicable | RCM Liability | ITC |
|---|---|---|---|---|---|
| Services provided by way of renting of a motor vehicle provided to a body corporate | Proprietorship firm, HUF or partnership firm etc. | Body corporate entity | Yes | Body Corporate | ● Not available to Body Corporate due to section 17(5) of CGST Act 2017 ● Available only in case of same line of business |
In other words,
- If non body corporate entity provide the services of renting of motor vehicle to body corporate entity, then reverse charge mechanism (RCM) will be applicable and service receiver (ie. Body Corporate) is required to pay GST under RCM.
- The RCM provisions of GST will applicable if following conditions are fulfilled: –
- The provider of service/cab operator is a non-body corporate entity (i.e. proprietorship firm, HUF or partnership firm etc.).
- The provider of service/cab operator is registered and charge 5% GST in the bill and availing ITC only in case of same line of business.
- The recipient of service is a body corporate.
- The RCM provisions of GST will not be applicable if following conditions are fulfilled: –
- The provider of service/cab operator is a body corporate entity.;
Or
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- The provider of service/cab operator is paying GST @ 12% under forward charges.;
Or
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- The recipient of service is not a body corporate (i.e. Proprietorship firm, HUF or partnership firm etc.).
4. Service Provider & Service Receiver in the same state: –
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- If the service provider and service receiver are located in the same state, the service receiver is requiring to pay CGST @ 2.5% & SGST @ 2.5%.
5.Service Provider & Service Receiver in the different state: –
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- If the service provider and service receiver are located in the different state, the service receiver is requiring to pay IGST @ 5%.
6. ITC Availability: –
-
- Input tax credit would not be available to the service receiver (i.e. body corporate) which is paid under RCM.
- Because as per section 17(5) of CGST Act, 2017, renting or hiring of motor vehicle having approved seating capacity up to 13 persons (including driver) is not allowed as input tax credit.
7. Point to be Noted
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- The HSN 9966 is relating renting of road vehicle with operator and the HSN 9973 is relating to leasing and renting of machinery, equipment and vehicles without operators. RCM is applicable on the services under HSN code 9966.
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