Hey there, fellow finance enthusiasts! Today, we’re diving into an interesting case about Yulu Bikes Pvt. Ltd., a company that’s making urban commuting fun and eco-friendly in Bengaluru with their e-bikes and bicycles. If you’ve ever wondered how GST applies to such innovative services, you’re in for a treat!
So, what’s the buzz about? Yulu Bikes went to the GST authorities to figure out the correct tax rate for renting out their e-bikes and bicycles. Let’s break down what happened and why it matters for anyone in the business of renting vehicles.
The company filed the appeal against the AAR order No. KAR ADRG 49/2020 dated 30.09.2020 where the GST of 18% is applicable was imposed and the company’s contention of imposing GST similar to the rate of goods imposed has been rejected.
Details of the Case
| Details | Information |
| Applicant | M/s Yulu Bikes Pvt. Ltd., Bengaluru |
| State | Karnataka |
| Order No. | KAR/AAAR/03/2021 |
| Order Date | 02.02.2021 |
| Key References | Notification No. 11/2017-Central Tax (Rate), Section 97 of CGST Act, 2017, Notification No. 20/2019-Central Tax (Rate) |
| Filed against | KAR ADRG 49/2020 dated 30.09.2020 |
Questions Raised
The applicant sought clarification on whether the renting of e-bikes (Miracle) and bicycles (Move) without an operator can be classified under SAC 9973 – Leasing or rental services without operator, as per Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, as amended.
The Karnataka AAR order No. KAR ADRG 49/2020 dated 30.09.2020, stated that the renting or leasing of e-bikes cannot be classified under HSN 9973, and aggrieved by the order, the company filed an appeal before Karnataka AAAR. Therefore, the said order may be set aside and the e-bikes should be classified with GST rate of 5%.
Key Points
- Applicant’s Interpretation: Yulu Bikes argued that their services should be classified under HSN 9973 following an amendment effective from 1st October 2019, which distinguished between rental services with and without an operator.
- GST Rate Clarification: The applicant proposed that the GST rate for renting vehicles without an operator should be:
- 5% for e-bikes (Miracle)
- 12% for bicycles (Move)
- AAR’s Decision: The Authority for Advance Rulings (AAR) rejected the applicant’s interpretation, stating that the classification of services should remain under HSN 9966, which covers rental services of transport vehicles with or without operators.
- AAAR’s Decision: AAAR has set aside the order passed by the AAR and renting of e-bikes will be taxed at 5% and bicycles will be taxed at 12% without an operator.
Analysis and Findings
The AAAR found that:
- The amendment to the notification no 11/2017, has made HSN 9973 – “leasing or renting without operator” available for leasing or renting of e-bikes or bicycles.
- As per the user agreement of the company, there is no transfer of rights of goods. There is no transfer of any interest in the vehicle in favor of the rider. The vehicle continues to be in the possession of the company only.
- The Applicant being renting the vehicles (e-bikes, bicycles) without operator to their customers would also get covered within the classification under the HSN 9973 – Leasing or rental services without operator w.e.f. 01st October 2019.
- Further, sl.no. 17(viia) of notification 11/2017 C.T(R) dated 28th June 2017 as amended is extracted below for your ready reference –
| Sl No. | Chapter, Section, Heading | Description of Services | Rate (percent) |
| 17 | Heading 9973 (Leasing or Rental Services without operator | (viia) Leasing or renting of goods | Same rate of central tax as applicable on supply of like goods involving transfer of title in goods. |
As per Schedule-I of the Notification No. 01/2017-CT(R) dated 28.06.2017 as amended , the e-bikes are taxed at 5%
| Sl No. | Chapter/Heading/Tariff | Description of Goods | Amended Notification |
| 242A | 87 | Electrically operated vehicles, including two and three wheeled electric vehicles. Explanation .- For the purposes of this entry. “Electrically operated vehicles” means vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include E- bicycles. | Entry Inserted By 12/2019-CTR Dt. 31/07/2019 |
As per Schedule-I of the Notification No. 01/2017-CT(R) dated 28.06.2017 as amended , the bicycles are taxed at 12%
| Sl No. | Chapter/Heading/Tariff | Description of Goods | Amended Notification |
| 208 | 8712 | Bicycles and other cycles (including delivery tricycles), not motorized |
FAQs
- What is the GST rate for renting e-bikes without an operator?
- As per the ruling, the GST rate remains under the classification of HSN 9973, which is the rate of tax will be the same rate of tax as applicable on supply of goods involving transfer of title in goods.
- Can the classification of services change with an amendment to the rate notification?
- Amendments has clarified that HSN 9973- “Leasing or rental without operator”
Key References and Notifications
- Notification No. 11/2017-Central Tax (Rate): Provides the initial framework for GST rates on services.
- Notification No. 20/2019-Central Tax (Rate): Clarifies the rates for leasing and rental services.
- Section 97 of CGST Act, 2017: Governs the application for advance rulings.
Conclusion
The ruling clarifies that the rental services provided by Yulu Bikes Pvt. Ltd. should be classified under SAC 9973. This decision ensures that the GST rate for their services remains consistent with the classification for rental services of transport vehicles, emphasizing the importance of accurate classification in determining tax rates.
