RENTING CARS WITHOUT OPERATOR, Goods and Services Tax - GST

[SSOE SSOE]

Dear Sir/Madam

As per notification No. 20/2019- Central Tax (Rate) dated 30.09.2019 wef 1.10.2019, Sac code 9966 applicable only for renting with operator and Sac code 9973 applicable only for renting with out operator.

1.What is the sac code for renting of cars without operator?

2.What is the gst rate for renting of cars without operator?

3.Is car covered under a) Equipments; b)Machinery

Posts / Replies

[Alkesh Jani]

Shri

The SAC 996601 refers to Rental services of road vehicles including buses, coaches, cars, trucks and other motor vehicles, with or without operator. The Notification No.11/2017-CT (Rate) dated 28.06.2017 (as amended from time to time) Sl.No.10(iii) clearly states [(iii) Rental services of transport vehicles with or without operators, other than (i) and (ii) above" and corresponding Rate is 9% (effective 18%).

In my point of view, the suitable classification is as above. Moreover, SAC 9973 is not applicable in your case, as it is support service.

Motor vehicle is very well defined in motor vehicle act and it does not fall within the ambit of equipment or machinery.

Any different view is solicited.

Thanks

[SSOE SSOE]

Sir

In the notification no. 20/2019- Central Tax (Rate) dated 30.09.2019 wef 1.10.2019, among other things,applicability of SAC code 9966 is restricted to services with operator by way of amending heading.

In the same notification applicability of SAC code 9973 is restricted to services without operator by way of amending heading.

What is their intention behind this amendment.

In this context kindly answer my above questions.

[Alkesh Jani]

Shri

The amendment to the Notification makes the service exclusively for renting of motor vehicle with operator. Therefore, service by way of renting of motor vehicle without operator will fall under SAC 996601 and rate will be not elsewhere specified i.e. effective 18%.

Regarding 9973 is already discussed.

Thanks

[Alkesh Jani]

With regards to intention, It may be to align with the definition of goods and effective control of goods. As we know that in case of supply of tangible goods the effective control plays important role. here it is seen that "where the cost of fuel is included in the consideration charged from the service recipient" therefore more specifying the service for purpose of levy of tax.

[SSOE SSOE]

Sir

Only services with operator covered under 9966.Deals with motor vehicles and other transport vehicles (not machinery and equipments).

Only services with out operator covered under 9973.Deals with machinery and equipments.(not motor vehicles)

Since headings are amended and we have to read the tariff item in conjunction with headings, the real problem arises i.e renting of vehicles with out operator and renting of machinery,equipments etc., with operator.

In this case how to classify the service and what rate we should apply?

Kindly do the needful

 

Motor vehicles without operator not covered under sac code 9966

[Alkesh Jani]

Shri

First of all, we need to classify the services with regards to SAC codes and explanatory notes.

SAC 9966 is with regards to “Rental services of transport vehicles with or without operators” and SAC 9973 is with regards to “Leasing or rental services with or without operator”. As already discussed, SAC 9966 s with regards to motor vehicle while 9973 is with regards to machinery and equipment with or without operator.

Now, the government has the power to levy tax on supplies of goods or services or both. Therefore, only the services as specified under Notification No.11/2017-CT (Rate) will be levied at the rate mentioned in the corresponding column. By way of notification there is levy at the rate for vehicle with operator, while motor vehicle without operator will be at the rate not specified elsewhere. For classification of services we do not need to read in conjointly, rather which services specifically falls within the description.

In this case, one need to focus on service provided i.e. whether vehicle for transport of passenger (with or without operator) is supplied or any machinery and equipment (with or without operator ) is supplied, in both the case, the description which matches the notification shall be levied to the tax accordingly.

For better understanding, please refer Notification 11/2017 which is issued under Section 9(1), 11(1),15(5) and 16(1) of CGST Act,2017. Please go through Section 9(1) and Section 11(1) (specified goods or service). Hope this will clear your doubt.

Thanks

[Ganeshan Kalyani]

In either case, GST @18% is applicable.

[SSOE SSOE]

Sir

Explanatory Notes to the Scheme of Classification of Services is amended by the CBIC wef 01.10.2019.

FYI : https://www.cbic.gov.in/resources//htdocs cbec/gst/explanatory_notes_01oct19.pdf;jsessionid=844F8A8A2861649C372DA564E6865A9E

But CBIC has forgotten to amended annexure to 11/2017 Central Tax (Rate) Notification “Scheme of Classification of Services”

This creates a whole lot of confusion.

Further gst rate finder in cbic -gst.gov.in website also amended headings

FYI: https://cbic-gst.gov.in/gst-goods-services-rates.html

Kindly go through once and do the needful

[Alkesh Jani]

Shri

Please refer my reply No.6 dated 22.06.2020. effort is made to simplify the matter.

In your case, renting of car with or without operator is to be classifiable under SAC 996601, however, as per Section 11(1) which reads as under

“(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification”

Therefore, government by way of notification has specified service of Rental service of transportation of passenger vehicle with a condition that “where the cost of fuel is included in the consideration charged from the service recipient” at a reduced rate of 2.5% (effective 5%). Now if the cost of fuel will not charged from the service recipient, then the benefit of reduced rate will not be applicable, however, it does not effects the classification of service.

More simplifying, only the service as specifically described in the notification will be levied to such rate of tax, although falling under the same SAC code.

Hope this will clear your doubt and confusion.

[SSOE SSOE]

Thank you Alkesh Jani ji for all your replies.

Can any one comment on our conversation and provide your views.

[KASTURI SETHI]

Pl. see my views against Issue ID 116501.

[Vedant Kumar]

Sir, any conclusion arrived on the above issue. Especially what rate to be charged for renting of cars.

Whether rate of goods as per sl.no. Viia or rate as 18% as per sl.no. Viii of HSN 9973.