GST Rate for Cab service provider

[Rajbir Yadav]

There are two rate for Cab service provider, either he can charge GST @18% with ITC or he can do the billing @5% without ITC. If individual (proprietorship firm) do the billing by opting to pay @5% to body corporate, it comes under RCM. So my query in this is : can service provider do the billing to few body corporate by opting GST @18% with ITC and to few other @5% without ITC which will fall uder RCM and avail the ITC proprotionately in proportion to the billing @18%.

[Sadanand Bulbule]

A motor cab operator cannot selectively charge 5% GST without ITC for some clients and 18% GST with ITC for others, since the concessional 5% rate is subject to the condition that no input tax credit is availed on inputs and input services used for providing that service. Such a condition operates at the supplier level and not on an invoice-wise basis, and therefore the rate option cannot be exercised selectively for different clients.

 

[KALLESHAMURTHY MURTHY K.N.]

Sir,

Notification No. 22/2019-CT (R) dated 30th September, 2019, inserted Entry Number 15 by amendment to the principal Notification No. 13/2017-CT (R) dated 28.06.2017, effective from 01.10.2019, that a body corporate receiving services from any individual cab Services provider is liable to tax payable @5% under RCM. He cannot charge the body corporate 18% tax on forward charges.

Further, the individual cab service provider cannot charge both a 5% and an 18% tax. He should opt for either a tax of 5% without ITC or 18% with ITC, but not both.

[Rajbir Yadav]

Hi,

Thank you for your response. However, Notification No. 22/2019 prescribes that when the supplier charges GST at 5% and issues an invoice to a body corporate, the liability shifts under RCM. Importantly, this notification does not restrict the supplier from opting to bill the body corporate at 18%. If such a restriction were implied, it would effectively mean that cab services could only be supplied at a single rate of 5%, which is not the case in practice.

For reference, Notification No. 15/2025 prescribes the rate of 18% (amended from 12% to 18%). Therefore, if we accept the interpretation that services provided to a body corporate are always liable to GST at 5% under RCM, then the rate notification itself should have explicitly stated that the 5% rate applies only to supplies made to non-body corporates.

[Shilpi Jain]

Unlike GTA, the option to pay at different tax rates is available to the cab service provider.

HOwever,m this notification of RCM is not updated for the changes in rates from 12% to 18%. Considering this as an inadvertent error, you can opt for either for 5% or 18% for yoour supplies and accordingly take credit.

[Rajbir Yadav]

I am also on the same view. Agreed with your statement

[YAGAY andSUN]

The scheme of taxation for motor cab services under the Central Goods and Services Tax Act, 2017 read with Notification No. 11/2017-CT (R) prescribes two alternative rates-5% without ITC (subject to the condition of non-availment of input tax credit) and 18% with ITC. The condition attached to the concessional 5% rate is a substantive restriction, operating at the level of the supplier and the nature of outward supply, and not qua individual invoices. Therefore, a supplier cannot artificially bifurcate supplies to avail ITC on some transactions (18%) while denying it on others (5%) if common inputs/input services are used. Such selective application would defeat the conditional exemption framework and is not legally tenable except where supplies are clearly segregable and independent in terms of input usage.

Further, Notification No. 13/2017-CT (R), as amended by Notification No. 22/2019-CT (R), mandates that where motor cab services are supplied by an individual (including proprietorship) to a body corporate, tax is payable by the recipient under RCM at 5%, thereby excluding forward charge at 18% in such cases. Hence, for supplies to body corporates, the supplier cannot opt to charge 18% under forward charge. The rate structure and RCM mechanism must be applied consistently based on recipient category and statutory conditions, and not at the discretion of the supplier. The argument of "inadvertent error" in rate alignment (12% to 18%) has no legal force unless rectified by notification; thus, compliance must strictly follow the notified provisions.

[Pinnacle Tax Advisor]

Notification No. 22/2019 prescribes that when the supplier charges GST at 5% and issues an invoice to a body corporate, the liability shifts under RCM. Importantly, this notification does not restrict the supplier from opting to bill the body corporate at 18%. If such a restriction were implied, it would effectively mean that cab services could only be supplied at a single rate of 5%, which is not the case in practice.

For reference, Notification No. 15/2025 prescribes the rate of 18% (amended from 12% to 18%). Therefore, if we accept the interpretation that services provided to a body corporate are always liable to GST at 5% under RCM, then the rate notification itself should have explicitly stated that the 5% rate applies only to supplies made to non-body corporates.

I have not found any provision in the GST rules that restricts cab service providers-unlike GTA operators-from choosing only one rate, i.e., either 5% without ITC or 18% with ITC. In the case of GTA, the notification specifically requires the service provider to opt for one option and submit a declaration at the beginning of the year. However, no such requirement exists for cab services.

Further, as explained above, Notification No. 22/2019 does not impose any restriction that billing to a body corporate must necessarily be under RCM. In addition, if we refer to the explanation provided in Notification No. 15/2025 (rate notification), it clearly states that where common credit is used partly for such supplies and partly for other supplies eligible for ITC, the ITC must be reversed by treating supplies taxed at 5% as exempt. This language strongly indicates that cab service providers can exercise both options during the year.

AI Summary

Rate choice for cab services: supplier-level restriction limits using reduced rate without ITC versus standard rate with ITC. Motor cab services qualify for either a concessional reduced rate without input tax credit or a standard rate with input tax credit; the non availment condition attached to the reduced rate operates at the supplier level and precludes selective invoice level application of the reduced rate where common inputs are used, unless supplies are demonstrably segregable. Separate notification provisions shift liability to recipients for supplies by individuals to body corporates under the reverse charge mechanism, and ITC used partly for reduced rate supplies must be apportioned or reversed by treating those supplies as exempt for credit reversal purposes.