RCM on renting of motor vehicles.

Last updated: 07 January 2020

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Quick Summary

This notification clarifies the Reverse Charge Mechanism (RCM) for services involving the renting of motor vehicles designed to carry passengers, where fuel costs are included. Suppliers have a choice regarding Goods and Services Tax (GST) payment. They can opt to pay 5% GST while having limited Input Tax Credit (ITC) restricted to services within the same business line. Alternatively, they can choose to pay 12% GST and avail full ITC.

F. No. 354/189/2019-TRU

Government of India

Ministry of Finance

Department of Revenue

Tax research Unit

North Block, New Delhi,

Dated the _________, 2019

To,

The Principal Chief Commissioners/ Chief Commissioners/

Principal Commissioners/ Commissioner of Central Tax (All) /

The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Subject– Reverse Charge Mechanism (RCM) on renting of motor vehicles -reg.

Suppliers of service 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 have an option to pay GST either at 5% with limited ITC (of input services in the same line of business) or 12% with full ITC.

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FAQ :

The notification concerns the Reverse Charge Mechanism (RCM) on the renting of motor vehicles designed to carry passengers, where the cost of fuel is included in the charge.

Suppliers have two options: pay 5% GST with limited Input Tax Credit (ITC) of input services in the same line of business, or pay 12% GST with full ITC.

Yes, the notification applies to renting of motor vehicles where the cost of fuel is included in the consideration charged from the service recipient.

For the 5% GST option, the Input Tax Credit (ITC) is limited to input services in the same line of business.