Reverse Charge (RCM) on Renting of Motor Vehicle

Introduction:

RCM on rent of Motor Vehicle was notified w.e.f. 01/10/2019 through notification no. 22/2019 CGST(rate) dated 30-09-2019. Later due to some confusion amendments and clarifications are introduced on 31/12/2019 through Notification No. 29/2019- CGST(Rate) and Circular No. 130/2019. A detailed study of the topic is as follows:

Definition:

Renting meaning: Word Renting has not been defined under the GST Act but we can understand this with followings:

As per Cambridge Dictionary: "a fixed amount of money that you pay regularly for the use of a room, house, car, television, etc. that someone else owns"

As per Oxford Dictionary: "the amount of money that you pay to use something for a particular period of time"

Reverse Charge (RCM) on Renting of Motor Vehicle

Passenger Transportation service: Passenger transportation services & means conventional public transit service which operates on a fixed route and is available to the public for a fare, intercity bus transportation, vanpools, subscription buses, tour and charter bus transportation, bus transportation of pupils for educational purposes, taxicabs licensed to conduct business in a municipality, air and rail passenger transportation except for air charter services, and special transportation services for the elderly or persons with disabilities.

Motor Vehicles: As per GST act Section 2(76): shall have the same meaning as assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988;

As per Motor Vehicles Section 2(28): "motor vehicle" or "vehicle" means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding 1 [twenty-five cubic centimeters];

RCM Provisions:

S.No.	Category of Supply of Services	Supplier of Service	Recipient of Service
15	Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate.	Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 percent. to the service recipient	Any body corporate located in the taxable territory.

Interpretation:

Service: Renting of Motor Vehicle for transportation of Passenger+ Cost of fuel included in the consideration

Service provider: other than Body corporate charging GST @5%

Service Recipient: Body Corporate in the taxable territory

Example: XYZ Company enter into contract with Mr. Satish proprietor of Indian cab services for receiving services of renting of motor vehicle for it’s employees. Mr. Satish is charging Rs. 50,000+5% of GST for the services.

In the above example, XYZ is liable to pay GST under RCM.

HSN Code wise RCM applicability

HSN Code	Description of Service	Rate	Condition	RCM Applicability	Reason of Applicability
9964 Passenger Transportation Service	(vi) Transport of passengers by any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient.	5	Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken. [Please refer to Explanation no. (iv)]	Not Applicable	This HSN code provides for the transportation service not for Renting of Motor vehicle Since only renting is covered in RCM this HSN Code is out of the preview of RCM. Example: Public Transportation service, Service by Ola, Uber
9964 Passenger Transportation Service		12	With Full ITC		Same as above
9966 Renting of Motor Vehicle with Operator	(i) Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient.	5	Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle) has not been taken. [Please refer to Explanation no. (iv)]	Applicable	Renting of Motor Vehicle where cost of fuel included and supplier is charging GST @ 5% RCM is applicable as per notification 22/2017- CGST(Rate) Example- Company enter into a contract for transportation of employees, Hired a car where consideration is calculated on per km basis
9966 Renting of Motor Vehicle with Operator		12	With Full ITC	Not Applicable	Service on which 12% GST charged not covered under RCM
	(ii) Time charter of vessels for transport of goods	5	Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken [Please refer to Explanation no. (iv)].	Not Applicable	Transportation of passenger is covered under RCM
	(iii) Rental services of transport vehicles with, other than (i) and (ii) above.	18	With full ITC	Not applicable	Service on which 18% GST charged not covered under RCM