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GST Update on Admissibility of itc to the supplier of services of rent-a-cab & other transportation vehicles

GST Update on Admissibility of itc to the supplier of services of rent-a-cab & other transportation vehicles

Opinion

Rent a cab service is very important service which is being availed by almost all the companies in routine. The admissibility of credit on these services has been conditional one in the service tax era and even now in the GST regime. This update seeks to give an insight on the admissibility of ITC on these services under various situations. 
Notification no. 11/2017-CT(Rate) dated 28.6.2017 has notified the rates of tax on certain services and conditions attached thereto. Entry no. 10 to this notification prescribes the following rates in respect of rental services of transport vehicles falling in SAC no. 9966:-
(i) Renting of motorcab where the cost of fuel is included in the consideration charged from the service recipient:-
It will be chargeable to CGST @ 2.5%. A condition is prescribed in front of this rate which states that "credit of input tax charged on goods and services used in supplying the service has not been taken". This condition will be deemed as satisfied if:-
(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.
(ii) Rental services of transport vehicles with or without operators, other than (i) above.:-
It will be chargeable to CGST @ 9%. However, no condition is prescribed in front of this.
The analysis of this notification makes it clear that the tax @ 5% (2.5% CGST & 2.5% SGST) will be charge in following cases:-
• The renting of motor-cab where the cost of fuel is included in the consideration.
• The input tax credit has not be availed.
In all the other cases the rate of 18% shall apply. However, ITC in respect of such supply shall be allowed. Also, the renting of transport vehicles other than motor cab shall always be covered in 18%. But there is option in case of renting of motor cab according to which concessional rate of 5% can be claimed on the condition that the ITC is not taken and the consideration includes the cost of fuel.
Moreover, recently, the GST council has given an option to Rent-a-cab operator. They can charge 12% GST with input tax credit and 5% without input tax credit. Also, there is reverse charge mechanism for rent-a-cab operator. But when he avails 12% option then the rent-a-cab operator has to pay the GST. Also, the credit of motor vehicle will be available to him as it is used for transportation of passengers. But the notification of this amendment is not issued so far.
Another important point is definition of “motor cab”. It will be taken from Motor Vehicles Act. “Bus” will not be covered in the definition of “cab”.

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