Government vide notification no. 29/2019 dated 31.12.2019 amended  Notification No. 13/2017 ( CTR) dated 28 June 2017.

Notification No. 13/2017 was published in the Gazatte of India dated 28.06.2017 and was last amended vide notification no. 22/2019 – (CTR)  dated 30 Sep 2019 .

This amended notification no. 22/2019 dated 30th Sep 2019 has brought renting of motor vehicle services under RCM. Following entries have been inserted vide the said notification :-

Sl Category of Supply of Services Supplier of Service Recipient of Service
(1) (2) (3) (4)
15 Services provided by way of renting of 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.

The wording at coloum 3 (supplier of service) of the notification 22/2019 created a lot of confusion. Details at coloum 3 indicates RCM applicability for supplier of services. When a service is covered under RCM , taxes  would be paid by the recipient of services  and not by the supplier of services  whereas the phrase used in coloum 3 of the said notification is “Any person PAYING central tax “ This phrase created ambiguity and was interpreted as if supplier need to pay tax on RCM.

RCM under GST on Renting of Motor Vehicles

Government vide circular no. 354/189/2019-TRU dated 31.12 2019 clarified the interpretation of the said notification and also substituted the existing entries with following entries vide amended notification no. 29/2019 dated 31.12.2019 :-

Sl Category of Supply of Services Supplier of Service Recipient of Service
(1) (2) (3) (4)
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 per cent to the service recipient Any  Body Corporate located in the taxable territory

Relevant  points emerged from the substituted entries (coloum 2 & 3 above) in the amended notification are as indicated below :-

(a) The word “Motor vehicle” word is replaced with “motor vehicle designed to carry passengers” Earlier the word motor vehicle was only written there. It was covering all types of motor vehicles. But the intent was to cover only those motor vehicles meant to carry passengers. Renting of Trucks, cranes, JCB machines was not to be covered by provisions of RCM .Therefore , now only those motor vehicles which are designed to carry passengers for renting out will attract tax on RCM basis.

(b) Renting amount should be inclusive of cost of fuel . In case the fuel is not covered in consideration it will not be covered Reverse Charge Mechnism.

(c) Renting out  vehicle by corporate entity will not be covered under this entry. Therefore, RCM is applicable only if the supplier is a person other than corporate entity.

(d) RCM is not applicable where the recipient is non corporate entity. A person renting motor vehicle to a person other than a corporate entity , will be charging tax on forward charge basis.

(e) Supplier can not levy GST @ 12% on corporate entities and therefore has to necessarily levy GST @ 5% under RCM.

Above amendments have been summarized and have been tabulated below for easy appreciation :-

Sl Supplier Recepient GST rates RCM Applicability
1 Ashoka Travels (Registered in GST) Bharat Electronics Limited (Corporate Entity) 5% Yes
2 Ashoka Travels (Registered in GST) Any person other than corporate 12% with ITC or 5% without ITC No
3 Prakash Travels Ltd (corporate entity) Bharat Electronics Limited (Corporate Entity) 12% with ITC or 5% without ITC No
4 Prakash Travels Ltd (corporate entity) Any person other than corporate 12% with ITC or 5% without ITC No
5 Mr. X – A person **, (not registered in GST) Bharat Electronics Limited (Corporate Entity) 5% Yes
6 Mr. X – A person **, (not registered in GST) Any person other than corporate 12% with ITC or 5% without ITC No

**  Note : Coloum 3 of the amended circular specifies supplier as ANY PERSON and not ANY REGISTERED PERSON. Hence, it can be interpreted  that services by way of renting motor vehicle  by Unregistered person to a body corporate is also subject to RCM .Clarification from  Government, in this regards is awaited

Author can reach at caanitabhadra@gmail.com

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32 Comments

  1. Jolly says:

    I started a business of Bread and Bun manufacturing(PvtLtd Comapany), wholesales and retail. I am a registered dealer under gst act. I pay the rent Rs.45.000 per month of godown and office room (Immovable property) to the owner (unregistered person) as well as I use the light goods vehicle as a delivery van. I pay the rent Rs.25000/ month to the vehicle owner ( other unregistered person).

    do i have to pay the tax according to the RCM in both rent (services receiving from unregistered person)

    If yes , kindly tell me the rate of tax and hsn code. can i claim the IPT

  2. Haramohan Biswal says:

    Ma’m
    Please clarify what is the rate of GST in case an individual having GST number rents its car to an Govt Office with driver, but without fuel @ 30, 000 per month.
    Is there anything to do with the ITC or RCM in this case , if yes how
    Thanking you

  3. KESHAV DESHMUKH says:

    OUR COMPANY HIRE CAR ON LEASE RENT FROM REGISTERED COMPANY AND THEY CHARGE 18% GST. CAN OUR COMPANY TAKE INPUT TAX CREDIT ?

  4. LalitNyati says:

    hi ma’m, if a company receive a invoice from an individual (service provider) who is registered under GST (Regular) with 18% (9%+9%) GST.

    In this case any benefit to company receive an invoice without GST and pay GST under RCM?
    Is there any law compliance in future if company receive invoice with GST?

    Thanks

  5. Lalit Nyati says:

    hi ma’m, if a company receive a invoice from an individual (service provider) who is registered under GST (Regular) with 18% (9%+9%) GST.

    In this case any benefit to company receive an invoice without GST and pay GST under RCM?
    Is there any law compliance in future?

    Thanks

    1. ANITA BHADRA says:

      Dear Sir
      Supplier can not levy GST @ 18% / 12% on corporate entities and therefore has to necessarily levy GST @ 5% under RCM.
      The company has to pay 5% under RCM and can not claim credit as cab hire is blocked credit under 17(5).
      Hence, no Benefit to Company

      1. VIKAS says:

        1)Why a supplier cannot charge 12% and 18% rates from Body Corporate. In case they want to avail full ITC having similar line of business and where the cost of fuel is not included, they can charge the rate of 12% and 18% respectively.
        2)Another of your view, I do not agree i.e. applicability of RCM from unregistered person. Whereas the clarification clearly says “Any person other than body corporate paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only in similar line of business” RCM will be applicable.

        It clearly implies that Unregistered person which were not paying any tax earlier at the rate of 2.50% is on renting is not covered under RCM.
        Hence, in my opinion, services from unregistered person is not covered under RCM.
        VIKAS
        ACMA,CS

  6. Tanisha garg says:

    Sir , I have doubt on that when person who is unregistered supplier which is providing service to registered person other than corporate entity then how can unregistered supplier charge gst of 12% and 5% as per case

  7. Asams V Krishna says:

    Dear Ma’am,
    So if i want to start the business of renting vehicles designed to carry passengers , it would be better if i register as proprietorship.
    If i a register as a company , i would have to collect gst from customers and looking from a layman perspective , the service would become costly .
    so is it better to run the business as a proprietor ?

  8. Asams Krishna says:

    Dear Ma’am,
    If a company is providing the service of giving vehicles designed to carry passengers , then RCM Provisions are not applicable. So the company should collect gst from customers.
    But if the service provider is a proprietor , and if the other conditions for RCM is complied , he cannot collect gst from customers and hence his service would become cheaper , fropprosp

  9. Vivek Sethi says:

    Madam can you please describe body corporate under GST law for which this RCM is available by quoting the relevant section under which it is defined .

    1. Anita Bhadra says:

      Govt vide Notification No. 29/2018- Central Tax (Rate) Dated 31.12.2018 has amended RCM provisions .
      As per explanation of the said notification :-
      “Body Corporate” has the same meaning as assigned to it in clause (11) of section 2 of the Companies Act, 2013.

      The term “body corporate” is defined in Section 2(11) of the Companies Act, 2013.

      Body corporate broadly means a corporate entity which has a legal existence
      This includes a private company, public company, one personal company, small company, Limited Liability Partnerships, foreign company etc.

      “body corporate” or “corporation” also includes a company incorporated outside India.

      However, body corporate does not include—
      (i) a co-operative society registered under any law relating to co-operative societies; and
      (ii) any other body corporate (not being a company as defined in the Companies Act 2013), which the Central Government may, by notification, specify in this behalf;

  10. Akash Jha says:

    Thank you so much mam for this beautiful article. It’s very helpful.
    Please clarify one more thing…
    If a GST Registered Person (Proprietorship) gives his Motor Vehicles (eg. Truck, Tata Ace, Eeco etc) on rent (including driver and fuel) to another GST Registered Person (Non GTA) and charge consolidated amount (of rent of vehicle, fuel and driver) at the end of the month. Is it Exempt? Will it attracts RCM or he should just charge GST on FCM? Please clarify from the supplier point of view.
    And If it attracts GST on FCM basis what would be the Gst Rate?

    1. Anita Bhadra says:

      Dear Sir
      Thanks for your comment.
      RCM is not applicable as the recipient is not body corporate.
      GST Rate is 18% on the vehicle ( truck etc ) hire charges

  11. Lakshay Gupta says:

    Hello Ma’am,
    I have doubt in 6th line item discussed in summarized tabular form, my issue is How unregistered person charged 12% with ITC or 5% without ITC on service recipient that is Any person other than corporate .
    And in that case RCM applicability is NO.
    ??

    .

  12. Vivek malave says:

    Madam
    If Ashoka Travels (Registered in GST) provide service to both 1) to body corporate 2) other than body corporate. And he is charging 12% GST with claiming ITC.

    Whether RCM rule applies for service provided to Body Corporate????

    1. ANITA BHADRA says:

      Dear Sir
      RCM will be applicable for his services to Corporate and he can not charge 12% to corporate .

      For others , RCM is not applicable and he has option to charge 5% without ITC and 12% with ITC

    1. Anita Bhadra says:

      person can not charge GST @12% On Forward charge to a corporate If he is calming in put Credit because , it is specifically restricted for a supplier to issue invoice @ 6% ( 12% CGST+SGST ).

      Refer coloum 3 of notification 29/2019 :-
      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 per cent to the service recipient

      1. vbansal says:

        I think a non body corporate if providing these services to body corporate can still charge 12% GST being there is no restriction that RCM is mandatory in such case, it is mentioned that if service provide is not charging 12% then only RCM will apply. Please share your views.
        Also can service receiver may take credit of 5% RCM GST if he is also in the same business?

  13. CA. Neelam Yadav says:

    The notification 29/2019 dated 31st December 2019 contains- In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), where as section 9(4) has not been refer anywhere in the said notification.
    So, can we still assume that the said notification shall be applicable on unregistered persons.

    1. Anita Bhadra says:

      Dear Sir
      The charging section 9(4) of the CGST Act has been amended vide CGST Amendment Act, 2018

      A careful reading of newly substituted sub section 4 will show that provisions of reverse charge under this sub section would be made applicable to a“ SPECIFIED CLASS OF REGISTERED PERSONS” in respect of supply of specified categories of goods or services or both received from an “UNREGISTERED SUPPLIER”

  14. PHANI PRASAD says:

    CA Anita, can you please clarify.. in RCM applicable table Point No.6, unregistered supplier to any person other than corporate entity.. it is mentioned 12% with ITC and 5 % without ITC. RCM –“NO”, then how the discharge of tax liability will take place… i am confused a bit.. please

    1. Anita Bhadra says:

      Dear Sir ,

      You are right ,
      Point 6 has been incorporated just to explain RCM provisions .
      Tax Rate is not relevant as supplier is unregistered and RCM is also not applicable .

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