HSN 9973 is a crucial classification under GST, covering a range of leasing or rental services. When initially GST was implemented, HSN 9973 used to contain leasing or rental services with or without operator. But, vide notification no. 20/2019-CT(R) has removed the word “with” under HSN 9973. Now, HSN 9973 deals with leasing or rental services without operator only.
This article explains the significance of HSN 9973, latest updates and notifications, various sub-categories, their GST implications, and practical examples to help you in businesses, understand and comply with GST regulations.
What is HSN 9973?
HSN (Harmonized System of Nomenclature) 9973 covers services related to the leasing or renting of various types of equipment, without operators, vide notification no. 20/2019-CT(R). This broad category includes several sub-categories, each catering to specific types of equipment or services.
GST Rates for HSN 9973
Under GST, the rate applicable to services classified under HSN 9973 varies based on the specific nature of the service provided. Generally, the following GST rates apply:
- Leasing or Rental Services without Operator: Typically governed with the Sl No. 17 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 amended vide Notification no. 20/2019- Central Tax (Rate) dated 30.09.2019
- It is noted that now Leasing or Rental Services with Operator is not included under HSN 9973. However, it is also to be noted that the rate can vary, often subject to the type of equipment or vehicle leased and the context of the service. For example, in case of leasing or renting of motor vehicle with operator (cab services) is taxed at 5%.
Reproduce the SL No. 17 of the Notification 11/2017 as amended
| 17 | Heading 9973 (Leasing orrental services without operator) *”with” removed through Notification 20/2019 | (i)Entry Omitted By 06/2021-CTR Dt. 30/09/2021 | – |
| (ii) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information Technology software or other than IT software | 9% CGST and 9% SGST or 18% IGST | ||
| (iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration | Same rate of central tax as on supply of like goods involving transfer of title in goods | ||
| (iv) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof. | Same rate of centraltax as on supply oflike goods involvingtransfer of title in goods | ||
| (v) removed vide Notification 20/2019 | |||
| (vi) Leasing of motor vehicles purchased and leased prior to 1st July 2017; | 65 per cent. of the rate of central tax As applicable on supply of like goods Involving transfer of title in goods. Note:-Nothing contained in this entry shall applyon or after 1st July, 2020. | ||
| (vii) removed vide Notification 20/2019 | |||
| (vii(a)) Leasing or renting of goods | Same rate of centraltax as on supply oflike goods involvingtransfer of title in goods | ||
| (viii) Leasing or rental services, without operator, other than (i), (ii), (iii), (iv), (vi), and (viia) above | 9% CGST and 9% SGST or 18% IGST |
What does Information technology Software means in GST:
Explanation – (v) “information technology software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.
My opinion of Sl No. 17(iii) – The transaction involves transferring the right to use goods, not necessarily ownership. This could be:
- Renting or leasing goods (e.g., car rentals, equipment rentals)
- Granting a license to use goods (e.g., software licenses)
My opinion Sl No. 17(vi) – The leasing of motor vehicles purchased and leased before July 1st, 2017. This means.
- The applicable GST rate is 65% of the regular central tax rate. This is a concessional rate compared to the usual GST rate for leasing services.
- Note: This clause is no longer valid on or after July 1st, 2020. So, it wouldn’t apply to leasing agreements initiated after that date.
This implies that The leasing of motor vehicles with operators falls under Sl no. 9966 and GST of 5% is applicable but leasing of motor vehicles without an operator is charged similar to sale of goods i.e., motor vehicles. This has been clarified in Board’s Circular No. 206/18/2023-GST dated 31.10.2023, and you can read my Post – Know GST on Passenger Transport and Motor Vehicle Leasing
My opinion Sl No. 17(vii(a)) – This covers situations where you grant temporary use of goods to someone in exchange for a fee. The GST rate for leasing or renting goods is the same as the GST rate applicable if you were to sell those same goods outright (transfer of title)
Example:
- Let’s say the standard GST rate for laptops is 18%.
- If you rent out a laptop, the GST rate on the rental fee would also be 18%.
My opinion Sl No. 17(viii) – it is very simple to understand. Any Leasing or rental services, without operator, which is not mentioned in Sl No. 17 (i), (ii), (iii), (iv), (vi), and (vii(a)) above, will be charged at 18% of GST.
Subcategories of HSN 9973
997311: Transport Equipment Leasing: GST is 18%
- Includes leasing of vehicles, containers, etc., with or without operators.
997312: Agricultural Machinery Leasing: It is exempted under Notification No. 12/2017-CT
- Covers leasing of tractors, harvesters, and other agricultural machinery.
997313: Construction Machinery Leasing: GST is 18%
- Encompasses cranes, bulldozers, and other construction equipment.
997314: Office Machinery Leasing: GST is 18%
- Includes leasing of office machinery excluding computers.
997315: Computer Leasing: GST is 18%
- Covers leasing of computers with or without operators.
997316: Telecommunications Equipment Leasing: GST is 18%
- Includes leasing of telecommunication devices and related equipment.
997319: Other Machinery and Equipment Leasing: GST is 18%
- Encompasses miscellaneous machinery and equipment not categorized elsewhere. Example: Leasing industrial machinery for manufacturing.
997321: Home Entertainment Equipment Leasing: GST is depending upon the rate of similar items
- Covers leasing of TVs, radios, projectors, and related equipment.
997322: Video Tapes and Disks Leasing: GST is depending on the rate of similar items when you sell the goods
- Encompasses leasing of video tapes and disks for home entertainment.
997323: Furniture and Household Appliances Leasing: GST is 12% or 18%
- Includes leasing of household furniture and appliances. It can be noted that on most of the leasing or renting of machinery, property etc, is charged at 18% but the renting or leasing of household goods and furniture are taxed at 12%
997324: Pleasure and Leisure Equipment Leasing: GST is 18%
- Covers leasing of equipment used for recreational purposes.
997325: Household Linen Leasing: GST is 18%
- Encompasses leasing of household linens.
997326: Textiles, Clothing, and Footwear Leasing: GST is equal to the rate of similar items in goods selling or buying
- Includes leasing of textiles, clothing, and footwear.
997327: Do-it-Yourself Machinery and Equipment Leasing: GST is 18%
- Covers leasing of DIY tools and equipment.
997329: Other Goods Leasing: GST is 18%
- Includes leasing services for goods not classified elsewhere.
997331-997339: Licensing Services: GST is GST is equal to the rate of similar items in goods selling or buying.
- Covers licensing services for the right to use various intellectual properties and natural resources.
Remember GST on leasing of Intellectual Property Rights in IT software or other items is 18% specified in Sl No. 17(ii) and also note that HSN 9973 sub-category services are also related to leasing or renting without operators.
Conclusion
Understanding HSN 9973 and its implications under GST is crucial for the businesses involved in leasing or rental services. The proper classification and compliance ensure that businesses apply the correct GST rates, thereby avoiding legal complications and optimizing their tax liabilities.
Whether leasing machinery, vehicles, or other equipment, adhering to GST guidelines under HSN 9973 is essential for smooth and efficient business operations. It is very important to stay updated with GST notifications and amendments as the GST Council frequently revises rates and classifications.
