pri GST on Rent-a-cab GST on Rent-a-cab

CA Adit Babel

Mode of transportation has changed drastically in our country since the rise of Ola and Uber. Just a few clicks/taps and your cab arrives at your doorstep . However, they are not the only players in the market, there are many more private cab service providers as well who provide their services to various corporate houses and individuals. Since the inception/enforcement of GST Act, there have been many discussions on the effects of GST on the Rent-a-cab service providers and the government has tried their best to keep the impact of GST on industry as simple as possible.

In that process, Government has revised the rate of GST on Rent a cab service vide notification no. 20/2017 – Central Tax (Rate) dated 22 August, 2018.  In this process, the government had reduced GST liability of transport of passengers by motorcab service providers by providing them with two options of either availing full ITC and discharge GST @12% or a GST liability of 5% with no ITC benefit available.

This scheme of GST was not as per intention of Government of doing away with “cascading effect” since the cab service providers who were using 3rd party cab services were not able to claim ITC benefit and client had to bear double burden of GST on the same service. Let us understand this concept through an example:

Suppose M/s CNX LLP, a cab service provider, entered into an agreement with M/s ABC Ltd to provide cabs to their organization in all the metros in India.

As M/s CNX doesn’t have own cars in every city, it contracted with M/s Cab and Co. to supply cars as required by M/s ABC Ltd.

Situation M/s Cab & Co – CNX LLP M/s CNX LLP – M/s ABC Ltd.
Trip charges   1,000.00
GST @ 5%              50.00
Total  1,050.00
Trip charges   1,050.00
GST @ 5%              52.50
Total  1,102.50

In the above case, end user ie. ABC Ltd is paying Rs. 52.50 as GST. Keeping this in mind, Government vide Notification No. 39/2017 – Integrate tax (Rate) dated 13 October, 2017 allowed cab service providers to avail the ITC charged by a 3rd party cab provider. Below is the extract of relevant text from NN 39/2017

(3) (4) (5)
“(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)]

Rent A CAB

Taking in the effect brought by NN 39/2017 (IT-R), M/s CNX LLP in the present example will be eligible to take ITC of GST charged by M/s Cab & Co as shown below.

Situation M/s Cab & Co – CNX LLP M/s CNX LLP – M/s ABC Ltd.
Trip charges   1,000.00
GST @ 5%              50.00
Total  1,050.00
Trip charges   1,000.00
GST @ 5%              50.0
Total  1,050

It is a big step taken by Government to do away with cascading effect of GST and a huge relief to end user who was suffering from the double GST payment on a single trip.

More Under Goods and Services Tax

21 Comments

  1. lokesh p says:

    Sir, My Client is providing services of vehicles to Health, vaternity and Agriculture department of Government inclusive with driver salary, petrol and other maintenance expenses.
    What will be tax rate if Liable and under which HSN Code ?

  2. SATHYA NARAYANA RAO says:

    SIR / MADAM,

    WE ARE A TRAVEL AGENT . WE OPERAT THE CAR RENTAL SERVICE WE PROVIDE THE CAB DAILY HIRING BASIS AND FIX BASIS. CAN U PLS ADVICE WE CAN RAISE THE SGST & CGST 12 % FOR DAILY HIRING BASIS AND MONRHLY FIX BASIS , AS OF NOW WE ARE CHARGING 5 % ONLY,

    REGARDS,

    S.SSATHYA

  3. CH VENKAT says:

    Dear Sir,
    ABC ltd taken hire vehicles on monthly rent basis provider is not register under GST
    in this case i have to pay RCM?
    IF register person who is liable to pay
    please guide me

  4. CA MULCHAND KHATRI says:

    Sir, My Client is providing services of vehicles to Health, vaternity and Agriculture department of Government inclusive with driver salary, petrol and other maintenance expenses. What is his liability in GST as registered ?
    What will be tax rate if Liable and under which HSN Code ?

  5. Rajan Jain says:

    Dear Sir
    Can a Company change the rate of gst in the mid of the year. example from april to jun charge 5% not availing Input but after July can it be charge @12% and avail input.

  6. HARSHIT THUMAR says:

    WE ARE REGISTERED PERSON RECEIVED TAKEN AS CAR ON RENT FOR VISIT AT CLIENT PLACE. RENT CAR SERVICE CHARGED US GST @5% ON BASIC AMT. ARE LIABLE TO PAY RCM ON IT.

  7. KOTTE VENKATESH says:

    SIR PLZ TELL ME
    VEHICAL CAB SERVICES
    GST ELIGIBLE SCHEME
    COMPOSITION ?
    REGULAR ?
    WITH GST TAX SLAB RATE
    PLZ SUGGEST ME SIR

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