OCTOBER 14, 2019

By K Srinivasan

RECENTLY consequent on the 37th GSTC Meeting, among several amendment notifications, one for amending the RCM procedure of renting of Motor Vehicle service denoted by SAC code 9964 was also introduced.

Notification No.22/2019-CTR dated 30/9/2019 effective from 1/1/2019 was introduced to insert reportedly a new serial No.15 after the Sl.No.14 in the existing principal Notification No.13/2017- CTR dated the 28th June 2017.

As per the above, services provided by way of renting of a motor vehicle provided to a body corporate by any person other than a body corporate, paying central tax at the rate of 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business, then the body corporate located in the taxable territory, will have to pay the said tax on RCM basis.

As per Notification 11/2017-CTR dated 28/6/2017, Transport of passengers by any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, the rate of tax would be 5% GST without ITC.

The above position was subsequently expanded to an additional optional tax rate of 12% GST with ITC vide Notification No.20/2017-CTR dated 22/8/2017 and 31/2017-CTR dated 13/10/2017, by insertion of a new sub-clause(vi) against serial 8 of the said Notification No.11/2017-CTR dated 28/6/2017.

About the same time, as per Notification 11/2017-CTR dated 28/6/2017, vide Serial No.10, Renting of motor cab where the cost of fuel is included in the consideration charged from the service recipient, 5% GST was payable by the service provider on FCM basis, provided that credit of input tax charged on goods and services used in supplying the service has not been taken, in compliance of explanation (iv) appended to the above which read as under;

(iv) Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,-

(a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and

(b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made there under.

The above position was subsequently expanded for Renting of Motor Vehicle service(SAC 9966) as well, with same additional optional tax rate of 12% GST with ITC as in the case of Transportation of Passenger service, vide the same Notification No.20/2017-CTR dated 22/8/2019 and 31/2017-CTR dated 13/10/2017, by insertion of a new sub-clause(i) against serial 10 of the said Notification No.11/2017-CTR dated 28/6/2017.

Also note the only difference between amending Notifications 20/2017 and 31/2017 is that the latter carried an additional explanation to the proviso as follows;

(i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken

But, presumably while seeking to introduce RCM @tax rate of 5% GST without ITC, Passenger Transport Services vide a new Notification No. 22/2019-CTR dated 30/9/2019, provided by a non-body corporate to Body corporate, only Renting of Motor vehicle service (SAC 9966) got covered and not Transportation of Passenger service (SAC 9964), concomitantly as done before each time an amending Notification was introduced to amend the Principal Notification No.11/2017-CTR dated 28/6/2017.

The task of differentiation between Renting of Motor Vehicle and Transportation of Passengers is as difficult as it would be to tell whether the chicken comes first or the egg.

Transportation of Passengers and renting of Motor Vehicle can possibly merge in all B2B transactions. It is also equally possible to provide Transportation of Passengers Service by a Non-body corporate to a Body corporate.

It is also possible for a person doing pure transportation of passengers to be identified as falling under SAC 9964 and SAC 9966, at the same time because from Service Tax days, frankly even the Government could not find a definite way to tell one between the other and that's an open secret and as also the reason to do any change to one entry in the same manner as the other, to the T as was demonstrated above in detail.

There is no definition for a Rent a cab anywhere from time past to time present. Therefore, it is expected that the Government will follow suit with a similar additional entry to the said Notification No.22/2019- CTR dated 30/9/2019 to bring under its RCM ambit Transportation of Passenger Service as well and also earmark them by their SAC codes to be clear and unambiguous.

(The Author is a former Assistant Commissioner of GST, Chennai and a CBIC Master Trainer GST, and currently a SeniorAssociate, Indirect & Corporate Taxes, at a Chennai-based Law Firm, RANK Associates. The views of the Author are purely personal.)