RCM on bus services

[Kaustubh Karandikar]

A partnership firm is providing bus services to a body corporate and not charging GST in the invoice. Whether the body corporate is required to pay GST under reverse charge? If yes whether GST under reverse charge is @ 5% or 12%or 18%?

[Shilpi Jain]

Is it transportation services provided or is it a renting of vehicle services?

If it is transportation services then no RCM.

Terms of contract would be relevant to decide this factor.

[Shilpi Jain]

Also find out why the firm is not charging GST. This could clear out many doubts.

Whether RCM / FCM is an aspect.

Another aspect is since it is a bus, credit of the tax paid under RCM or FCM would not be blocked and should be eligible.

[Shilpi Jain]

So, if the bus transporter does not have any concrete answers for not charging GST, consider paying GST under RCM and taking credit if eligible.

Try to bring clarity in the agreement to avoid future disputes from department.

[Kaustubh Karandikar]

Shilpi ji thanks for your kind advice. In my view, since the bus service with driver and diesel is provided by the service provider (partnership Firm) to transport the employees of the company, it will fall under Sr. No. 15 of Notification No.13/2017- Central Tax (Rate) dt. 28.06.2017 as amended by which the body corporate will be liable to pay GST under reverse charge. Further, as per Sr. No. 10(i) of Notification No. 11/2017-Central Tax (Rate) dt. 28.06.2017 as amended, the body corporate need to pay GST @ 5% under reverse charge and then avail input tax credit of the same. Your kind views please.

[Shilpi Jain]

what is covered under RCM is renting of vehicle and not transportation. Contract terms would be relevant to determine the applicability of RCM liability.

[KASTURI SETHI]

Dear Sir,

It is a classification issue. Whether RCM or FCM; it depends upon the correct classification. and correct classification depends upon terms and conditions of the contract/agreement. The . Board has issued clarification on distinction between 'Transport of Passenger Service' and 'Renting of Motor Vehicle Service' vide Circular No. 177/09/2022-TRU dated 3.8.22 (Para No.15 refer to). Board has given parameters and the final decision can be taken only by examining terms and conditions of the agreement. For more clarity also read para no.16 of the circular..

In the absence of terms and conditions, more comprehensive and fool-proof decision is not possible here.

[Padmanathan KV]

Just to add on to the discussion, Whether TDS is being deducted as rent or as contract?

AI Summary

Reverse charge liability hinges on whether the supply is renting of a vehicle or passenger transport, determined by contract terms. Whether GST is payable under reverse charge for bus services depends on classification as renting of motor vehicle versus transport of passengers; contract terms and the factual matrix determine applicability. If classified as renting of motor vehicle, reverse charge may apply and the recipient must pay tax at the notified rate and may claim input tax credit where eligible. Administrative guidance recommends examining the agreement and following the circular's parameters to distinguish the categories to avoid disputes.