QUESTION

ONE MY CLIENT IS OWNER OF 4 VEHICLES (2 LELAYLAND AND 2 12 SHEETRS) AND RUNNING ON ROAD THROUGH TRANSPORT BOOKING AGENCIES. HE SEND HIS VEHICLES ON THE INSTANCE OF AGENCY ON BOOKING AND GET PAYMENT IN CASH. HE IS ALSO REGISRED UNDER GST FOR MANUFACTURING AND TRADING IN READYMADE GARMENTS. LAST YEAR HIS TURNOVER WAS BELOW AUDITABLE LIMIT BUT THIS YEAR HIS T/O IS AUDITABLE. WHAT SHOLUD I ADVISE HIM FOR HIS ESCAPED PESSANGER TRANSPORT RECEIPTS WHICH HE RECEIVED IN CASH FROM AGENCY FOR PLYING HIS VEHICLES ON ROAD ? HIS AGENCY IS ALSO NOT DEDUCTING GST ? AGENCY SEEMS TO BE UNREGISTERED AS PER KNOW LEDGER OF MY CLIENT. WHAT SHOULD I ADVISE MY CLIENT TO COME OUT FROM THE PRESDENT SITUATION. HE IS READY TO PAY GST BUT ON WHAT RATE ? WHETHER 5% OR 12%.

ANSWER

Facts of the case:
A registered person is running his vehicles (Leyland and 12 seater) through Transport agencies and getting payment in cash from agency.

Law applicable:
Notification No. 12/2017- Central Tax (Rate)
 

22

Heading 9966

or

Heading 9973

 

Services by way of giving on hire '

(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

(aa) to a local authority, an Electrically operated vehicle meant to carry more than twelve passengers; or
 Explanation.- For the purposes of this entry, 'Electrically operated vehicle' means vehicle falling under Chapter 87 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) which is run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicle.
(b) to a goods transport agency, a means of transportation of goods.

(c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.

Nil

Nil

Notification No. 11/2017- Central Tax (Rate)

10. Heading 9966 (Rental services of transport vehicles with operators)

    

i) Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient.

2.5

Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (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.
[Please refer to Explanation no. (iv)

or

6

-

 

(ii) Time charter of vessels for transport of goods.

 

2.5

Provided that credit of input tax
charged on goods (other than on
ships, vessels including bulk
carriers and tankers) has not been taken
Please refer to Explanation no.
(iv)

 

(iii) Rental services of transport vehicles with operators, other than (i) and (ii) above

9

  

Interpretation:
In view of the above Notification service by way of giving on hire to GTA a means of transportation of goods is exempt from tax. In your case you are giving motor vehicles (ley-land) to agencies, thus this transaction is exempt from tax.
However in case of Passenger transport motor vehicle, the same is taxable under the Head 9966 as Rental services of transport vehicles and GST will be charged accordingly.

Conclusion:
The transaction of giving motor vehicles on hire to GTA as a means of transportation is exempt from tax and those given for passenger transport are taxable under the head 9966 as Rental services of transport vehicles.