Background:
Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, issued under Section 9(3) of the CGST Act, 2017, specifies the services on which tax is payable on reverse charge basis by the recipient. S. No. 15 of the Table, inserted with effect from 01.10.2019 vide Notification No. 22/2019-Central Tax (Rate) and substituted vide Notification No. 29/2019-Central Tax (Rate) dated 31.12.2019, covers “Services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient, provided to a body corporate”, where the supplier is “any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 6 per cent to the service recipient”, and the recipient is any body corporate located in the taxable territory.
The reference to “6 per cent” central tax reflected the then rate structure for renting of motor vehicles under S. No. 10(i) of Notification No. 11/2017-Central Tax (Rate), which gave suppliers the option of 5% with limited ITC or 12% (6% CGST + 6% SGST) with full ITC. CBIC Circular No. 130/49/2019-GST dated 31.12.2019 clarified that reverse charge applies only where the non-body corporate supplier does not charge 12%, i.e., where the supplier charges 5% or does not charge tax, the body corporate recipient is liable to pay tax under reverse charge; where the supplier charges 12%, it pays on forward charge.
With effect from 22.09.2025, on the recommendations of the 56th GST Council, the 12% slab was abolished and the “with ITC” option for renting of motor vehicles was revised to 18% (9% CGST) vide Notification No. 15/2025-Central Tax (Rate), which substituted “6” with “9” in S. No. 10(i) of Notification No. 11/2017-Central Tax (Rate). However, S. No. 15 of Notification No. 13/2017-Central Tax (Rate) continued to refer to “6 per cent”, a rate which no longer existed. Read literally, a non-body corporate supplier charging 9% central tax (18% GST) on forward charge would still not satisfy the exclusion, and the body corporate recipient would also be liable under reverse charge, leading to double taxation. This anomaly required correction.
What the Notification provides:
Now, the CBIC vide Notification No. 08/2026-Central Tax (Rate) dated 27.10.2026 (G.S.R. 942(E)), issued under Section 9(3) of the CGST Act, 2017 on the recommendations of the GST Council, has amended Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 (last amended vide Notification No. 07/2025-Central Tax (Rate) dated 16.01.2025) by substituting, against S. No. 15, in column (3), the figure “6” with the figure “9”. The supplier column of S. No. 15 will accordingly read: “Any person, other than a body corporate who supplies the service to a body corporate and does not issue an invoice charging central tax at the rate of 9 per cent to the service recipient”.
| Supplier (renting of passenger motor vehicle with fuel) to a body corporate | Position w.e.f. 01.11.2026 |
| Non-body corporate supplier (proprietor, partnership firm, HUF, etc.) charging central tax at 9% (18% GST) with full ITC | Forward charge by the supplier; no reverse charge on the body corporate recipient. |
| Non-body corporate supplier charging 2.5% (5% GST) or not charging GST (e.g., unregistered) | Reverse charge on the body corporate recipient under S. No. 15 (at 5%, without ITC of the supplier’s inputs). |
| Body corporate supplier (company, LLP, etc.) | Always forward charge at 5% (limited ITC) or 18% (full ITC), as opted. |
Corresponding amendments have been made vide Notification No. 08/2026-Integrated Tax (Rate) dated 27.10.2026 (G.S.R. 943(E)) substituting “12” with “18” against S. No. 17 of Notification No. 10/2017-Integrated Tax (Rate), and vide Notification No. 08/2026-Union Territory Tax (Rate) dated 27.10.2026 (G.S.R. 944(E)) in Notification No. 13/2017-Union Territory Tax (Rate).
Effective date:
The Notification comes into force with effect from 1st November, 2026. It is prospective, and does not expressly address the interregnum from 22.09.2025 to 31.10.2026 during which the rate notification referred to 9% while the reverse charge notification continued to refer to 6%. Taxpayers who, in line with the evident legislative intent and Circular No. 130/49/2019-GST, treated invoices at 18% issued by non-body corporate suppliers as discharging the liability on forward charge during that period have a strong basis to resist any demand under reverse charge, and a clarificatory circular on this point would be welcome.
Key takeaways for taxpayers and the industry:
- Body corporates availing cab/vehicle rental services: Vendor invoices from non-body corporate suppliers should be examined; where the supplier charges 18% (9% CGST + 9% SGST or 18% IGST), no reverse charge liability arises; where the supplier charges 5% or nothing, the body corporate must pay 5% under reverse charge, in cash, and report it in Table 3.1(d) of FORM GSTR-3B.
- ITC on the reverse charge tax: Credit of the tax paid under reverse charge on renting of passenger motor vehicles is subject to the restriction in Section 17(5)(b)(i) of the CGST Act, and is available only where the vehicle has a seating capacity of more than 13 persons (including the driver), or where the service is used for making an outward supply of the same category or as part of a composite/mixed supply, or where it is obligatory for an employer to provide such service to its employees under any law.
- Non-body corporate transport operators: Operators opting for 18% with full ITC should ensure that their invoices clearly show central tax at 9% and State tax at 9% (or IGST at 18%) so that the recipient is relieved of reverse charge; operators under the 5% scheme should not charge tax on supplies to body corporates, which will discharge the tax under reverse charge.
- Scope unchanged: The entry continues to cover only renting of motor vehicles designed to carry passengers where the cost of fuel is included in the consideration; renting of electrically operated vehicles where the cost of battery charging is included (new item 10(ib) of Notification No. 11/2017-Central Tax (Rate)) is not literally covered by the words “cost of fuel” in S. No. 15, and body corporates hiring EVs from non-body corporate suppliers should watch for any further amendment or clarification on this point.
Similar notifications have been passed under the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/N.-No.-08-2026-CT-UT-IG-Rate.pdf
