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Reverse Charge Mechanism on Rent-A-Cab Service

Published Date: 12-Feb-2020 12:12 PM

Since its introduction, the GST provisions have gone through many amendments from time to time. Recently issued Notification No. 22/2019-CT (R) dated 30.09.2019 clarifies the Reverse Charge (RCM) applicability on Rent-A-Cab Service. 

GST is payable under Reverse Charge Mechanism” when the incidence of tax falls on the person receiving the service. Though the word “Rent-A-Cab” has not been defined anywhere in the GST Act, the meaning can be construed as per the Motor Vehicles Act, 1988 as “any motor vehicle or motor cab or maxi-cab or stage carrier or a contract carrier” 

In this article, we will discuss about the RCM applicability on Rent-A-Cab under GST.

  1. RCM provisions of Rent-A-Cab will be applicable when all the three conditions below are satisfied:
    • Service Provider shall be other than Body corporate i.e., individual, HUF, partnership or proprietorship concern and,
    • such person is charging GST @ 5% without availing input tax credit,
    • Service Receiver shall be a Body corporate i.e., company (either private company or public company.)
  2. RCM provisions will not be applicable in case of following conditions:
    • in case, Service Provider is Body Corporate,
    • such person is paying GST @ 12% with or without availing input
    • Service Recipient is not a body corporate
  3. Whether IGST or CGST/SGST payment should be decided based on the place of supply of such service and GST to be paid @ 5% under HSN 9964 by recipient body corporate
  4. Input cannot be availed by the Body Corporate (Service Recipient) whether IGST/CGST/SGST paid on RCM basis as per Sec 17(5) of CGST Act, 2017, i.e., renting or hiring of motor vehicle having seating capacity up to 13 persons (including driver) will not be allowed to take ITC. Hence, this will be additional cost to the company.
  5. Leasing of Motor Vehicles under HSN 9973 from Non-Body corporate entities to Body Corporate, RCM provision won’t be applicable.
  6. This notification came in effect from 01.10.2019. As per notification, it is mandatory to comply with same provisions and pay the GST under RCM by the 20th of succeeding month of the relevant month.
If you need any further clarification on RCM Applicability on Rent-A-Cab feel free to reach us at contact@msassociates.pro or call us on 080-41633750 or 9880542668.