Introduction:

Usually, the suppliers of Goods or Services collect GST from the recipients and pay the same to the Government. But under Reverse Charge Mechanism, the receivers of the goods and services pay the tax to the government instead of the suppliers.

• • This Article provides a brief explanation on the RCM applicable on renting of Motor vehicle.

GST percentage applicable on renting of motor vehicle:
5% without ITC benefit
12% with ITC benefit

• • The GST Council in its 37th meeting held on 29/09/2019, recommended that RCM shall be applicable on renting of motor vehicles by a body corporate, to persons other than body corporates where the GST is charged at 5%.
• • The introduction of the above concept and the use of the words ‘’other than body corporate’’ created confusion among people.
• • In order to remove the ambiguity on the same, the CBIC has provided a clarification.
• • As per the clarification, RCM shall be applicable on renting of Motor vehicles designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient only if the following conditions are satisfied:

• • On the other hand, leasing of motor vehicles by corporate from persons other than body corporate shall not be covered under RCM.
• • In case where, the service provider has charged GST @ 5% then the same need not be reimbursed. Instead, he must be informed that he shall not charge GST for any future service as RCM shall be applicable.