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GST On Renting of Vehicles RCM

The circular addresses the Reverse Charge Mechanism (RCM) on renting motor vehicles, allowing suppliers to charge GST at either 5% with limited ITC or 12% with full ITC. It clarifies that when RCM applies, the service recipient pays the GST, and outlines conditions under which RCM is applicable for services provided to corporate bodies. The amendment is clarificatory and retroactively applies to the period from October 1, 2019, to December 30, 2019.

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21 views2 pages

GST On Renting of Vehicles RCM

The circular addresses the Reverse Charge Mechanism (RCM) on renting motor vehicles, allowing suppliers to charge GST at either 5% with limited ITC or 12% with full ITC. It clarifies that when RCM applies, the service recipient pays the GST, and outlines conditions under which RCM is applicable for services provided to corporate bodies. The amendment is clarificatory and retroactively applies to the period from October 1, 2019, to December 30, 2019.

Uploaded by

achsamirks
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Circular No.

130/49/2019- GST

F. No. 354/189/2019-TRU
Government of India
Ministry of Finance
Department of Revenue
(Tax research Unit)
*****
North Block, New Delhi,
Dated the 31st December, 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.

2. The GST Council in its 37th meeting dated 20.09.2019 examined the request to place the
supply of renting of motor vehicles under RCM and recommended that the said supply when
provided by suppliers paying GST @ 5% to corporate entities may be placed under RCM. RCM
was not recommended for suppliers paying GST @12% with full ITC, so that they may have the
option to continue to avail ITC. RCM otherwise would have blocked the ITC chain for them.
Accordingly, the following entry was inserted in the RCM notification with effect from 1.10.19:

Sl. Category of Supply Supplier of service Recipient of


No. of Services Service
(1) (2) (3) (4)
15 Services provided by Any person other than a body corporate, Any body
way of renting of a paying central tax at the rate of 2.5% on corporate located
motor vehicle renting of motor vehicles with input tax in the taxable
provided to a body credit only of input service in the same line territory.
corporate. of business

3. Post issuance of the notification, references have been received stating that when a
service is covered by RCM, GST would be paid by the service recipient and not by the supplier.

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Circular No. 130/49/2019- GST

Therefore, the wording of the notification that “any person other than a body corporate, paying
central tax at the rate of 2.5%” is not free from doubt and needs amendment/ clarification from
the perspective of drafting.

4. The matter has been examined. When any service is placed under RCM, the supplier shall
not charge any tax from the service recipient as this is the settled procedure in law under RCM.
There are only two rates applicable on the service of renting of vehicles, 5% with limited ITC
and 12% with full ITC. The only interpretation of the notification entry in question which is not
absurd would be that –
(i) where the supplier of the service charges GST @ 12% from the service recipient, the
service recipient shall not be liable to pay GST under RCM; and,
(ii) where the supplier of the service doesn’t charge GST @ 12% from the service recipient,
the service recipient shall be liable to pay GST under RCM.

5. Though a supplier providing the service to a body corporate under RCM may still be
paying GST @ 5% on the services supplied to other non body corporate clients, to bring in
greater clarity, serial No. 15 of the notification No. 13/2017-CT (R) dated 28.6.19 has been
amended vide notification No. 29/2019-CT (R) dated 31.12.19 to state that RCM shall be
applicable on the 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 only if
the supplier fulfils all the following conditions:–
(a) is other than a body-corporate;
(b) does not issue an invoice charging GST @12% (6% CGST + 6% SGST) from the service
recipient; and
(c) supplies the service to a body corporate.

6. It may be noted that the present amendment of the notification is merely clarificatory in
nature and therefore for the period 01.10.2019 to 30.12.2019 also, clarification given at para 5
above shall apply, as any other interpretation shall render the RCM notification for the said
service unworkable for that period which is not permissible in law.

7. Difficulty if any, in the implementation of this Circular may be brought to the notice of
the Board.
Yours Faithfully,

(Rachna)
OSD, TRU
Email: Rachna.irs@gov.in
Tel: 011 2309 5558

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