Clarifications regarding GST on renting of motor vehicles designed to carry passengers to be paid by corporate recipients /Firms
Govt. of India vide Circular No. 177/09/2022-TRU dated 03.08.2022 clarified whether RCM is applicable on service of transportation of passengers (Heading 9964) or on renting of motor vehicle designed to carry passengers (Heading 9966) by Body corporate.
RCM on Motor Vehicles was originally inserted vide NN-22/2019-Central tax (Rate) & then substituted vide NN-29/2019-Central tax (Rate) in which it was notified that services provided by a non-body corporate to a body corporate by way of renting of any motor vehicle for transport of passengers, tax is required to be paid by the body corporate under RCM.
Renting of motor vehicle with operator for transport of passengers falls under Heading 9966. the service covered here is renting of motor vehicle for transport of passengers for a period of time where the renter defines, how and when the vehicles will be operated determining schedules, routes & other operational considerations.
As recommended by the GST Council, it is clarified that where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966, & the body corporate shall be liable to pay GST on the same under RCM. Reverse charge thus would apply on act of renting of vehicles by body corporate and in such a case, it is for the body corporate to use in the manner as it likes subject to agreement with the person providing vehicle on rent.
'Passenger transport services' falling under Heading 9964.
Heading 9964 covers passenger transport services over pre-determined routes on pre- determined schedules.
As recommended by the GST Council, it is clarified that where the body corporate avails the passenger transport services for specific journeys or voyages & does not take vehicle on rent for any particular period of time, the service would fall under Heading 9964 & the body corporate shall not be liable to pay GST on the same under RCM.
Govt. of India vide Circular No. 177/09/2022-TRU dated 03.08.2022 clarified about hiring of vehicles by firms for transportation of their employees to & from work is exempt under Sr. No. 15(b) of NN. 12/2017-Central Tax (Rate) transport of passengers by non-air-conditioned contract carriage.
Sr. No. 15 (b) of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 exempts "transport of passengers, with or without accompanied belongings, by non-air-conditioned contract carriage, other than radio taxi, for transport of passengers, excluding tourism, conducted tour, charter or hire."
It is clarified that 'charter or hire' excluded from the above exemption entry is charter or hire of a motor vehicle for a period of time, where the renter defines how and when the vehicles will be operated, determining schedules, routes & other operational considerations.
In other words, the said exemption would apply to passenger transportation services by non- air-conditioned contract carriages falling under Heading 9964.
The exemption shall not be applicable where contract carriage is hired for a period of time, during which the contract carriage is at the disposal of the service recipient & the recipient is thus free to decide the manner of usage (route and schedule) subject to conditions of agreement entered into with the service provider.
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