Appellate authority reclassifies e-bike rentals under SAC 9973, not 9966. Correct GST rate applied.

The appellate authority determined that renting e-bikes and bicycles without an operator is classified under SAC 9973, not under SAC 9966. The correct GST rate applicable for such services is as per entry Sl.no.17(viia) of Notification No. 11/2017 CT (R) as amended. The lower authority's ruling was set aside, and the appeal by the appellant was disposed of accordingly.

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Issues Involved:
1. Classification of services for renting e-bikes and bicycles without an operator.
2. Applicable GST rate for the renting of e-bikes and bicycles without an operator.

Issue-wise Detailed Analysis:

1. Classification of Services for Renting E-bikes and Bicycles Without an Operator:

The appellant, engaged in renting e-bikes (Miracle) and bicycles (Move) in Bengaluru, approached the Authority for Advance Ruling (AAR) to classify their services correctly. They initially classified their services under HSN Code 9966, which covers "Rental services of transport vehicles with or without operators," and charged 18% GST. However, post-amendment of Notification No. 11/2017 CT (R) by Notification No. 20/2019 CT (R), they argued that their services should be classified under HSN Code 9973, which pertains to "Leasing or rental services without operator."

The AAR ruled that renting e-bikes/bicycles without an operator could not be classified under SAC 9973. Aggrieved, the appellant filed an appeal, asserting that the amendments clarified that HSN 9966 now covers only rental services with operators, while HSN 9973 covers services without operators. They argued that the lower authority erred in not considering these amendments.

The appellate authority examined the amendments and the explanatory notes and concluded that post-amendment, Heading 9966 applies only to rental services with operators. Since the appellant rents out e-bikes and bicycles without operators, their services fall under Heading 9973. The authority disagreed with the lower authority's interpretation, stating that the amendment notification also affected the classification of services, not just the tax rates.

2. Applicable GST Rate for the Renting of E-bikes and Bicycles Without an Operator:

The appellant argued that the appropriate rate of tax for their services should be as per entry Sl.No 17(viia) of Notification No. 11/2017 CT (R), which applies the same rate of central tax as on the supply of like goods involving the transfer of title in goods. They cited the rates for e-bikes (5%) and bicycles (12%) as per Notification No. 01/2017 CT (R).

The appellate authority examined whether the appellant's services could be classified under entry Sl.No 17(iii), which pertains to the transfer of the right to use any goods. However, they found that the appellant's user agreement did not transfer possession or effective control of the vehicles to the rider, which is essential for classifying under Sl.No 17(iii). Instead, the appellant retained control, and the rider only had access to use the vehicles.

Therefore, the authority concluded that the correct classification for the appellant's services is under entry Sl.No 17(viia) of Notification No. 11/2017 CT (R), which applies the same rate of tax as on the supply of like goods involving the transfer of title in goods.

Order:

The appellate authority set aside the ruling of the lower authority and concluded that renting e-bikes/bicycles without an operator is classifiable under SAC 9973. The applicable rate of tax is as per entry Sl.no.17(viia) of Notification No. 11/2017 CT (R) as amended. The appeal filed by the appellant was disposed of on these terms.

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