Reverse Charge under GST on Renting of Motor Vehicle

Renting of Motor Vehicle - RCM

 Government via Notification no. 22/2019 of CTR inserted Entry no. 15 in Notification no. 13/2017 dated 28th June 2017, w.e.f. 1st October 2019 to cover renting of motor vehicle under Reverse Charge Mechanism (RCM). However there were certain ambiguities with regards to the 'wording' of this notification. As per notification: 

S.No

Category of supply of service

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 above insertion appeared to be applicable in case where the service provider who is already a registered person paying GST at the rate of 5% (Claiming input credit of service in the same line of business) But the phrase "Any person paying central tax" created a confusion that whether the supplier needs to pay the tax under RCM.

In order to removes those ambiguities the government vide Circular no. 354/189/2019 TRU dated 31st December 2019 clarified the intend of the notification and also amended the entry vide Notification no. 29/2019, dated 31st December 2019.

Vide the said amendment, it had been provided that in case of renting of motor vehicle for the purpose of 'transportation of passenger (where the fuel cost is included in the consideration charged)', RCM will be applicable only when the following conditions are satisfied:


This 
  • The supplier is a person other than a body corporate;
  • The services are supplied to a body corporate; and 
  • The supplier does not issues a invoice to the recipient charging GST @ 12%.
Further, the circular clarified that this amendment is only clarification in nature and the same shall apply retrospectively i.e. the same shall be applicable from October 1, 2019.

Synopsis of the Amendment:


S.No.

Supplier

GST Rate

Recipient

RCM

1

Amaze Tours & Travels

5% with ITC in same line of business

Peppers (India) Private Limited

Yes

2

Amaze Tours & Travels

12% with ITC

Peppers (India) Private Limited

No

3

Amaze Tours & Travels

5% with ITC in same line of business

AB & Associates (Non Body Corp)

No

4

Easytrip Private Limited

5% with ITC in same line of business

Peppers (India) Private Limited

No

5

Asha Tours (Unregistered Person)

NA

Peppers (India) Private Limited

Yes


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