Reverse Charge - Renting of Motor Vehicle

[Kaustubh Karandikar]

GST under reverse charge on renting of motor vehicle will be applicable only when, those services are received by Body Corporate from a person, who procures such services from third party, who is in same line of business and therefore, avails ITC of tax charged by third party and then charges 5% GST.

In short, 1) Third Party providing renting service to a person will charge 5% (2.5% + 2.5%) GST which the person will claim ITC. 2) The person in turn while providing renting of motor vehicle service to Body corporate will not charge GST 2) Body Corporate to pay 5% GST under reverse charge on the invoice issued by the person but cannot claim ITC. 3) if the person is having his own vehicle and providing the renting service, he will charge applicable GST to Body Corporate and if the person is not registered with GST he will not charge but the Body Corporate in that situation is not required to pay GST under reverse charge.

Respected Experts, awaiting your response on my views

[Atul Rathod]

Dear Sir,

a)

1)There is no condition specified that RCM only applies to supplier providing service through own vehicle and not for supplier providing through third party.

2) i understand that the said thought is coming out from the wordings used in notification as "Any person other than a body corporate, paying integrated tax at the rate of 5% on renting of motor vehicles with input tax credit only of input service in the same line of business" .

3)The said line is added in above notification as it linked with condition for paying under 5%. The restriction is that if supplier wish to pay 5% he shall not take any credit other than ITC involved in service of similar line of business.

Therefore in my view even for renting of owned motor vehicle service also liable under RCM.

b) Agreed for that. No GST under RCM from URD supplier.

AI Summary

Reverse charge on motor vehicle renting: body corporate pays GST when supplier avails input tax credit and applies reduced tax. Reverse charge applies when a body corporate receives motor vehicle renting from a supplier who procured the service from a third party that charged tax and availed input tax credit; the body corporate must pay GST under reverse charge at the concessional rate but cannot claim input tax credit. If the immediate supplier owns the vehicle and charges GST, forward charge applies; if the supplier is unregistered, no reverse charge arises. A supplier charging the concessional rate must restrict input tax credit claims to input services in the same line of business.