You might be in the business of passenger transportation or renting a motor vehicle or leasing it. You have to understand there are three aspects of supplies and GST is charged differently on these supplies. This article clarifies the eligibility of ITC on services used for leasing motor vehicles without operators, a topic that has caused some confusion.
I tell you CBIC has issued circular no. 206/18/2023-GST dated 31.10.2023, in which they clarified the calculation of GST rate and mentioned the correct HSN.
Before that, you have to go through Section 17(5) which allows you to take ITC on a motor vehicle when you are in the same line of business or it is used in furtherance of your business.
But, you also need to know the GST to be charged on the outward supplies and avoid any penalties from the department.
Q. Whether ‘same line of business’ in case of passenger transport service and renting of motor vehicles includes leasing of motor vehicles without operators.
The Board has clarified that Passenger transport services (SAC 9964) and renting of motor vehicles with operators (SAC 9966) are considered to be in the same line of business for availing input tax credit (ITC) at 5% GST.
It clarifies that “same line of business” includes services like:
- Transporting passengers in a motor vehicle (HSN 9964).
- Renting a motor vehicle with an operator (Cab Service to another person) (HSN 9966).
Note that- when you rent a vehicle, you have to do it with an operator else it won’t fall under the same line of business. There is another HSN 9973 which has amended and the applicable on leasing goods or services without operator. Read this – Understanding HSN 9973: Leasing or Rental Services under GST
Leasing of motor vehicles without operators (SAC 9973) is not included in this definition. It falls under a different category and attracts GST at the rate applicable to the sale of motor vehicles. GST rate is calculated similarly it has been calculated on sale of normal motor vehicles under GST Act.
| Service | SAC Code | Same Line of Business (For 5% ITC) |
| Passenger Transport | 9964 | Yes |
| Renting Motor Vehicle (with Operator) | 9966 | Yes |
| Leasing Motor Vehicle (without Operator) | 9973 | No (charge similar to sale of motor vehicle) |
