Supply of bus service

[Kaustubh Karandikar]

XYZ(Proprietor) supplying Bus service to PQR Pvt.Ltd. for transporting their employees from factory to nearby destinations. In the month of January’21, XYZ crossed the threshold limit of ₹ 20 Lacs from this business.

1) Whether XYZ is required to register with GST and pay GST under forward charge or

2) PQR was required to pay GST under reverse charge?

[ABHISHEK TRIPATHI]

Dear Kaustubh Sir,

RCM is when the motor vehicle is rented, otherwise it is forward charge.

From the fact it seems like that XYZ is supplying passenger transportation services (without renting) hence, forward charge.

Contract carriage is exempted.

All these will determine the query. More fact along NN(s). 11, 12 and 13/2017 (Rate) will solve the query.

[KASTURI SETHI]

Sh.Kaustubh Karandikar Ji,

I agree with Sh.Abhishek Tripathi, Sir to the extent of, " More fact along NN(s). 11, 12 and 13/2017 (Rate) will solve the query."

The issue involved is of classification. After 1.2.19, there is a crystal clear distinction between the categories of, 'Passengers Transport Service' and 'Renting of Motor Vehicles'.In this scenario, ZYZ has rented bus to the one person i.e. Company (PQR Pvt. Ltd.) and not to the employees. XYZ has contract with the company and not with the employees. XYZ has nothing to do with the employees. The bus has been rented out with operator and cost of fuel is also included (my presumption from the query).

Hence this is not Passenger Transportation Service. This is rental service of transport vehicle with operator and classified under SAC 9966 and if without operator SAC 9973 will be applicable. See Notification No.11/17-CT(R) dated 28.6.17 as amended (Serial No.10(i) and 10(iii). This service is not classified under SAC 9964. Service has been provided by Prop. to body corporate. So there is not an iota of doubt about this bus service falling under RCM.

Pl Also go through this decision of AAR . This may help you in arriving at correct and concrete decision Applicant 2020 (7) TMI 410 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH :ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION

[Shilpi Jain]

The supply by XYZ is to PQR and that is in the nature of renting of vehicle. It will not fall under passenger transportation service as the passenger transportation services are generally where there are pre-determined routes with pre-determined schedules. Futher, the consideration is also generally based on the distance travelled/time basis to a specific destination.

In such a scenario it will be liable under RCM as XYZ is not a body corp and PQR is (assuming cost of fuel is included in consideration).

if all of XYZ 's supply are liable under RCM not required to take registration.

[KASTURI SETHI]

Pl.also go through the decision of AAR, Karnataka reported as 2019 (10) TMI 789 - AUTHORITY FOR ADVANCE RULING, KARNATAKA Applicant : Sharma Transports decided on 24.9.19.

 

[Shilpi Jain]

Relying on AARs are very risky. However, in the present case as well the serice recipient mentions the list of employees who need to be transported and that is how the service provider has to decide its route.

The service provider does not have a fixed route within which it operates. Also the bus will be hired for a period and it would not be a day to day contract.

So I still think it will be a renting service.

[Karan Bansal]

In my view, said supply will be covered under RCM and XYZ is not required to register under the GST regime.

[KASTURI SETHI]

Dear Sh.Karan Bansal Ji,

Will you please support your view with rationale ?

AI Summary

Reverse charge mechanism applies where bus service is rental to a company, shifting GST liability to the recipient. Classification of the bus service controls GST liability: if the supply is renting of a motor vehicle to a corporate (often including operator and fuel), the reverse charge mechanism applies and the recipient bears GST; if it is passenger transportation on predetermined routes/schedules it is forward charge. Critical facts include the contracting party, fixed routes/schedules, duration of hire, and inclusion of operator/fuel. If all supplies by the proprietor are under RCM, the proprietor may not need GST registration.