GST on Rent a Cab has been brought under Reverse Charge Mechanism (RCM) from 1st October 2019. In this article we will discuss all the relevant sections and notifications and how things changed over time.

Relevant Section: Section 9(3) of CGST Act 2017

Relevant Notification: Notification No. 13/2017- Central Tax (Rate) dated 28/06/2017

Relevant Notification: Notification no. 22/2019 – Central Tax (Rate) dated 30/09/2019

Relevant Notification: Notification No. 29/2019- Central Tax (Rate) dated 31/12/2019

Relevant Circular: F. No. 354/189/2019-TRU dated 31/12/2019

Notification No. 13/2017 was amended vide notification no. 22/2019 – Central Tax (Rate) dated 30/09/2019. It has brought renting of motor vehicle services under RCM. Following entries have been inserted vide the said notification:

Sl. No.	Category of Supply of Services	Supplier of Service	Recipient of Service
15	Services provided by way of renting of a 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.

Confusions caused by this Notification

1. Details at column 3 says “Any person PAYING central tax“, which indicates RCM applicability for supplier of services and not the recipient. This phrase created ambiguity and was interpreted as if supplier need to pay tax on RCM.

2. The word “motor vehicle” is used in column 2 there. It covers 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.

Clarification vide Notification No. 29/2019- CT(Rate)

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- Central Tax (Rate).

The following substitutions were made:

Sl. No.	Category of Supply of Services	Supplier of Service	Recipient of Service
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

So, in a nutshell, RCM on Rent a Cab is applicable only when service is supplied by “any person other than body corporate who does not charge 12% GST” to “a body corporate“.

📝 Note: Even after paying GST on RCM basis, ITC would still not be available to the body corporate/service recipient. Since under section 17(5) of CGST Act 2017, renting or hiring of motor vehicle having approved seating capacity upto 13 persons (including driver) is not allowed as input tax credit.