HSN (Harmonized System of Nomenclature) code 9966 pertains to the rental services of transport vehicles with operators. This classification under the GST is crucial for businesses involved in providing rental services for various types of transport vehicles, including cars, buses, trucks, and more.
Recent changes have refined the application and tax implications of this code, affecting how businesses operate and comply with GST regulations. To clarify your doubt and how much the GST rate should be imposed on the type of services provided under HSN 9966, I have written this article which will be helpful to you.
Details of HSN 9966
HSN 9966 covers the rental services of transport vehicles when provided with operators. This category includes:
- Passenger cars
- Buses and coaches
- Trucks and other motor vehicles
These services are essential for businesses and individuals requiring transport solutions with a driver or operator included.
Notification No. 11/2017 referred
The rate of tax mentioned and amended in the Notification No. 11/2017 is as follows: –
| 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% CGST and 2.5% SGST | 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. |
| (ia) Renting of goods carriage where the cost of fuel is included in the consideration charged from the service recipient. | 6% CGST and 6% SGST | ||
| (ii) Time charter of vessels for transport of goods. | 2.5% CGST and 2.5% SGST | Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken | |
| (iii) Rental services of transport vehicles with operators, other than (i), (ia) and (ii) above. | 9% CGST and 9% SGST |
List of services under HSN 9966 after changes
Now, we will see the list of services mentioned in the HSN 996 –
| 9966 | Rental services of transport vehicles with operators |
| 996601 | Rental services of road vehicles including buses, coaches, cars, trucks and other motor vehicles, with operator |
| 996602 | Rental services of water vessels including passenger vessels, freight vessels etc with operator |
| 996603 | Rental services of aircraft including passenger aircrafts, freight aircrafts etc with operator |
Summary of Key Changes
- Differentiation Based on Operator Inclusion:
- Prior to October 1, 2019, HSN 9966 covered both rental services with and without operators. However, a significant change from this date reclassified services without operators under HSN 9973, specifically for leasing and rental services without operators (Tax Management India).
- Tax Rates:
- 5% GST applies to renting of motor vehicles where the fuel cost is included in the consideration, and no input tax credit (ITC) can be claimed except for services procured in the same line of business.
- 12% GST applies to other rental services of transport vehicles where the cost of fuel is included.
- 18% GST is applicable to residual rental services of transport vehicles with operators, where the cost of fuel is not part of the consideration
- Reverse Charge Mechanism (RCM): Effective from October 1, 2019, renting of motor vehicles services also falls under the RCM if provided by a non-corporate entity to a corporate entity, provided the service provider opts for 5% GST.
- Specific Services with Nil GST:
- Rental services provided to state transport undertakings for vehicles carrying more than twelve passengers, or to local authorities for electrically operated vehicles designed to carry more than twelve passengers, are subject to Nil GST.
Also Read: GST on Passenger Transport & Motor Vehicle Leasing: Circular-206
FAQs
- What vehicles are covered under HSN 9966?
- HSN 9966 covers rental services for a range of transport vehicles including passenger cars, buses, coaches, trucks, and other motor vehicles, provided with operators.
- What is the applicable GST rate if the fuel cost is included in the rental charges?
- If the fuel cost is included in the rental charges, the applicable GST rate is 5% without the ability to claim input tax credit (ITC).
- What are the GST implications for renting vehicles to state transport undertakings?
- Such rentals are exempt from GST if the vehicle is designed to carry more than twelve passengers or if it is an electrically operated vehicle for public transport.
- Are transport services provided by the Educational Institutions exempt or not?
- services for transporting students, faculty, and staff to educational institutions are exempt from GST
- How can ITC be availed in GST returns?
- where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.
- Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs. 1000. ‘B’, for supplying the said service, hires a motor cab with an operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at the rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs. 48.
- If I provide the same line of rental services for transportation, can I take ITC?
- You cannot claim ITC on services you buy from another business that rents out vehicles or transports passengers. For example, if you hire a bus from another company to fulfill your rental contract, you can’t claim ITC on the tax paid for that bus rental.
Conclusion
Understanding the nuances of HSN 9966 and its recent changes is crucial for businesses in the transport rental sector. The differentiation based on operator inclusion and the specific GST rates and conditions highlight the importance of compliance and strategic planning in these services. Adhering to these regulations can ensure smooth operations and avoid any legal or financial discrepancies.
