Rate of tax (service)— In the instant case, applicant and Navi Mumbai Transport Undertaking (“NMMT”) have entered into an Operator Agreement dated 25.02.2020 vide which, Applicant shall be responsible to procure and supply air-conditioned electric buses to NMMT on gross contract basis to be plied on the routes identified by NMMT.

the applicant, seeking an advance ruling in respect of the following questions:

1. Whether services provided by the applicant to NMMT under the Agreement, by way of supplying, operating and maintaining air-conditioned electrically operated buses are taxable and subject to GST?

2. If the answer to (i) above is yes, what will be appropriate SAC (Services Accounting Code) for classifying the services provided by the applicant and applicable GST rate thereon?

3. Whether Applicant shall be eligible to avail the input tax credit of tax paid on the procurement of input supplies used in supplying services to NMMT under the Agreement?

 In the case of transportation of passengers, the recipient of service would be the passenger whereas in the case of renting of any motor vehicle, the recipient would not be the passenger. In the subject case, the consideration for supply of service is charged from NMMT and not the passenger. Therefore in the subject case it is clear that the recipient of service is NMMT. Hence, we have no hesitation in holding that the subject activity, amounts to 'renting of motor vehicle' and shall qualify as a taxable activity under the provisions of the GST Laws.

 Since the subject activity is taxable, the provisions of Notification No. 12/2017-CT (R) dated 28.06.2017 is not applicable in the subject case. The subject case is clearly covered by Entry Sr. No. 10 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended in as much as there is a Rental services of transport vehicles with or without operators and the activities of Renting of any motor vehicle/transport vehicle which is designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient are chargeable to either 2.5% GST or 12% GST depending on availment of Input Tax Credit. 

Held that—  Services provided by the applicant to NMMT under the Agreement, by way of supplying, operating and maintaining air-conditioned electrically operated buses are taxable and subject to GST.

The appropriate SAC (Services Accounting Code) for classifying the services provided by the applicant is Tariff Heading 9966. The rate of GST is 12% (with availment of ITC) or 5% (without availment of ITC)

The Applicant shall be eligible to avail the input tax credit of tax paid on the procurement of input supplies used in supplying services to NMMT under the Agreement only if they pay tax @ of 12% on output service.