RCM ON RENTING OF MOTOR VEHICLES UNDER GST

[arun das]

As per the GST Notification no.22/2019 dtd.30th Sep,2019, RENTING OF MOTOR VEHICLE has been brought under RCM bracket. The definition of 'Motor Vehicle' under Motor Vehicles Act covers almost all motorised vehicles ,except a few. In this regard kindly confirm the following;

1. Whether hiring of vehicles for TRANSPORTATION OF EMPLOYEES by a company on a regular basis , will attract RCM? (fuel cost included in contract,ITC is not availed by the supplier, The contract nomenclature is ' Hiring of Buses/Cars for a period of 3 years')

2. What if the fuel cost is NOT included in contract, in the above example.

3. Is there any separate treatment applicable for CASUAL hiring contract ( hiring on need basis)

There is lot many confusion exist in the industry with respect to above inclusion . Kindly throw some light on this pls.

[KASTURI SETHI]

Query-wise reply is as under :- ( A company is hiring vehicles from service provider. Service provider is providing (supplying) Renting of Motor Vehicles. The word, 'hiring' is to be used by the service receiver and the word, 'renting' is to be used by the service provider. Such slim line is drawn between both.).

1. You are a body corporate and suppose you are receiving service of 'Renting of Motor Vehicles' from individual, Proprietorship, Partnership concern etc. (i.e. other than body corporate). You are to pay GST @ 5% under RCM. Hiring of buses/cars/vans etc. is included the category of 'Renting of Motor Vehicles'.

2. In view of a scenario above in your query no.1, the issue of exclusion of cost of fuel is not applicable to you. It is for those service providers who supply this service in the same line of business. For example ; If a vehicle is arranged by way of rent by the service provider for further renting out. Suppose there are three persons X, Y & Z. X supplies his vehicle on hire to Y and Y, in turn, supplies that vehicle to Z. Tax paid by X can be availed as ITC by Y and Y can still charge GST @ 5% from Z. Thus we can say that ITC chain is not broken. As per Notification No.22/19-CT(R) dated 30.9.19, Service Provider must be paying GST 5% (It is natural that that person will be registered and RCM is not applicable to an unregistered person.)

3. No there is no separate treatment for hiring motor vehicles casually as mentioned by you.

Read Notification No.22/19-CT(Rate) dated 30.9.19 with Notification No.11/17-CT(Rate) Serial No.10 (i) &(ii) as amended vide Notification No.31/17-CT(Rate) dated 13.10.17.

[arun das]

Thank You Sethi Sir for giving clarity on this subject.

[arun das]

Further, in such cases whether RCM is applicable for those cases where the work done is before 1.10.2019 and invoiced after that date?

[KASTURI SETHI]

Yes. RCM is applicable as per Sections 13 and 14 of CGST Act. Relevant portions are extracted below:-

SECTION 13. Time of supply of services. - (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.

(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely :-

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier :

SECTION 14. Change in rate of tax in respect of supply of goods or services. - Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely :-

(a) in case the goods or services or both have been supplied before the change in rate of tax, -

(i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or

(ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or

(iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

[Guest]

Dear experts

If company provide Cab facility to employees and recover certain percentage of Cab charges from Employees and pay GST on received consideration on monthly basis.

In this case what is applicability of RCM & Procedure ?

[KASTURI SETHI]

The Company (Service-supplier) is a corporate body and providing service to its employee.. Hence no RCM is applicable. Forward Charge Mechanism is applicable. Employee is to be treated an individual.

[arun das]

Sethi Sir,

Regarding RCM on Renting of motorvehicle.

If the supply (work done ) is prior to 01.10.2019, and invoice is also raised before such date, RCM is not applicable,right?

[KASTURI SETHI]

Yes. You are right.

[Gopi Kanth]

Hello Sir,

Few doubts in this regard.

As now 5% RCM is to done by service receiver,Should the service provider if a registered dealer has to provide GST Bill or Bill of Supply alone is sufficient?

I understand basically that RCM is to be done when service provider is non registered.This amendment differs to it.

[Madhavan iyengar]

Based on the discussions i would like to add following:

the Service provider who is renting the motor vehicles to body corporates would need to adhere to the time of supply as provided in sec 13(2) where it is mentioned that the Time of supply shall be earliest of following dates

a) Date of issue of invoice by supplier, if invoice is issued within prescribed period u/sec 31(2) or date of receipt of payment which ever is earlier

b) date of provision of service if invoice is not issued within period prescribed u/sec 31(2) or date of receipt of payment whichever is earlier

Going by above the services for month of September 2019 are complete on 30th september 2019 and in terms of sec 31(2) as prescribed in rule 47 as provided below

47. Time limit for issuing tax invoice.- The invoice referred to in rule 46, in the case of

the taxable supply of services, shall be issued within a period of thirty days from the

date of the supply of service

Thus for September 2019 the service provider can raise invoice upto 30th October and if the invoice is not raised within time limit of 30 days then date of supply of service will be 30th Sept 2019 for purpose of charge of tax

Hence effectively what it means is for Rentals of motor vehicles of Sept 2019 it wont be covered under RCM but under Forward charge

Expert views solicited if above understanding is right in view of the provisions of law and rules

[suresh sathyamurthy]

Renting of Motor vehicle is covered under RCM for body corporate, should service provider charge GST @ 5% and service receiver (body corporate) pay 5% under RCM total 10% or only receiver should pay 5% under RCM and service provider give bill of supply, kindly clarify

AI Summary

GST on Renting Vehicles for Employee Transport: 5% Under RCM for Non-Corporate Rentals Post-October 2019. Fuel Costs Irrelevant. A discussion on the Goods and Services Tax (GST) implications for renting motor vehicles under the Reverse Charge Mechanism (RCM) was initiated, focusing on whether hiring vehicles for employee transportation attracts RCM. It was clarified that companies receiving vehicle rental services from non-corporate entities must pay GST at 5% under RCM. The inclusion of fuel costs in contracts does not affect this obligation. Casual hiring contracts receive no separate treatment. RCM applies to services invoiced after October 1, 2019, regardless of when the service was performed. For corporate bodies providing cab services to employees, Forward Charge Mechanism applies. The service provider must adhere to the time of supply rules, and only the service receiver pays 5% under RCM, with the provider issuing a bill of supply.