RCM Entry 15: Renting a Passenger Motor Vehicle, and the Heading That Decides It

RCM Entry 15 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Employee transport is where this entry lives, and it produces more confusion than any other in the notification — because two things must be decided before the entry applies at all: which heading the supply falls under, and what rate the supplier chose.

Entry 15 of Notification No. 13/2017-CT(Rate), in its form w.e.f. 01.01.2020, 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". The supplier must be any person other than a body corporate who does not issue an invoice charging central tax at 6% to the recipient; the recipient must be a body corporate located in the taxable territory. Circular No. 130/49/2019-GST confirms that charging the higher rate switches the entry off. Circular No. 177/09/2022-TRU decides the harder question: renting under heading 9966 attracts RCM; passenger transport for specific journeys under heading 9964 does not.

The 2020 recast

The entry has had two lives, and the earlier one still explains old assessments.

From 01.10.2019 to 31.12.2019, it read: services provided by way of renting of a motor vehicle provided to a body corporate, the supplier being any person other than a body corporate, paying central tax at 2.5% on renting of motor vehicles with input tax credit only of input service in the same line of business.

From 01.01.2020, the entry was recast to its present form. Two changes matter:

• The service description narrowed to "any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient" — a goods vehicle, or a dry lease where the hirer buys the fuel, is outside it.
• The supplier condition was restated negatively: the supplier is one who "does not issue an invoice charging central tax at the rate of 6 per cent to the service recipient".

The negative formulation is what makes the entry self-switching, and Circular No. 130/49/2019-GST dated 31.12.2019 states the consequence in two lines:

• where the supplier charges GST at the higher rate from the recipient, the recipient is not liable under RCM; and
• where the supplier does not charge at that rate, the recipient is liable under RCM.

The two options in the rate notification

Under entry 10(i) of Notification No. 11/2017-CT(Rate), heading 9966 (rental services of transport vehicles with operators), a supplier of this service has two options as the Handbook records them:

• Option 1 — the lower rate (2.5% CGST + 2.5% SGST/UTGST, or 5% IGST), with limited ITC only of input services in the same line of business; or
• Option 2 — the higher rate (6% CGST + 6% SGST/UTGST, or 12% IGST), with full ITC on goods and services used in supplying the renting service.

Entry 15 is drafted against Option 2. Take Option 2 and issue an invoice at that rate, and reverse charge does not apply. Stay on Option 1, and the body corporate pays.

A rate caution. The Handbook states the law to 1 February 2025 and Volume I reproduces the same option structure. The services rate notification remains 11/2017-CT(Rate) as amended from time to time — Volume I confirms that it was the goods rate and exemption notifications (1/2017 and 2/2017) that were superseded, by 9/2025 and 10/2025-CT(Rate) dated 17.09.2025. Read the rate figures in entry 10(i), and the "6 per cent" reference in Entry 15, against the rate notification in force on the date of the invoice. The mechanism — higher rate charged means no RCM — is unaffected.

Circular 177/09/2022: renting or transport?

This is the clarification that resolves most disputes, because heading 9964 (passenger transport) and heading 9966 (renting of transport vehicles with operator) can describe the same cab on the same road.

The ambiguity was real: was RCM applicable on transportation of passengers (heading 9964) or on renting of a motor vehicle designed to carry passengers (heading 9966)? On the GST Council's recommendation, Circular No. 177/09/2022-TRU dated 03.08.2022 clarified:

• Where the body corporate hires the motor vehicle for a period of time, during which the vehicle is at the disposal of the body corporate, the service falls under heading 9966, and the body corporate is liable to pay GST under RCM. As the circular puts it, reverse charge applies on the act of renting, "and in such a case, it is for the body corporate to use in the manner as it likes subject to agreement with the person providing vehicle on rent."
• Where the body corporate avails passenger transport service for specific journeys or voyages and does not take the vehicle on rent for any particular period of time, the service falls under heading 9964, and the body corporate is not liable under RCM.

The operative test is disposal over a period, not the mode of billing. A monthly contract for cabs placed at the company's disposal for the employee shuttle is renting. Booking a taxi for an airport run is transport.

A per-trip billing pattern does not by itself decide it. What matters is whether the vehicle is at the recipient's disposal for a period under the agreement.

The credit trap

The Handbook's illustration carries a warning that recipients frequently miss. A registered IT services company hires passenger vehicles from an unregistered transport provider for employee transportation between office and residence, and the Handbook notes:

"the recipient in either of the above scenarios, shall not be allowed to claim ITC, as renting passenger vehicles is not eligible for ITC if used for employee transportation, as per section 17(5) (Blocked Credit)."

So this entry can produce a genuine cost, not a timing difference. Where the credit is blocked under section 17(5), the tax paid under RCM in cash is not recoverable through the credit ledger.

The blocking provision has its own carve-outs, including the proviso that preserves credit where provision of the service is obligatory for an employer to provide to its employees under any law for the time being in force, and the limbs preserving credit for further supply of the same service and for onward taxable supplies. Test the arrangement against section 17(5) on its facts before writing the credit off — but do not assume the credit is available merely because the tax was paid in cash.

What is inside and what is outside

Note the recipient limb. Entry 15's recipient column is body corporate, not "registered person" — narrower than Entry 14. A partnership firm or LLP hiring cabs from an individual operator is not within Entry 15, whatever its registration status.

Key takeaways

• Entry 15 in its 01.01.2020 form requires a passenger vehicle, fuel included in the consideration, a non-body-corporate supplier, and a body corporate recipient.
• The entry is self-switching: an invoice charging the higher rate takes the supply out of RCM — Circular No. 130/49/2019-GST.
• Circular No. 177/09/2022-TRU separates heading 9966 renting (vehicle at the recipient's disposal for a period — RCM applies) from heading 9964 passenger transport (specific journeys — no RCM).
• The recipient column is body corporate only — a firm or LLP is outside the entry.
• Section 17(5) may block the credit of the tax paid, making this a real cost; test the section 17(5) provisos before writing it off.
• Read the rate figures in entry 10(i) of Notification No. 11/2017-CT(Rate) against the notification in force on the invoice date.

Read next

• RCM Entry 14: Security Services and Its Two Exclusions
• RCM Entry 1: Who Actually Pays GST on a GTA Freight Bill
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route

Disclaimer: Positions stated as on 5 September 2026, based on entry 15 of Notification No. 13/2017-Central Tax (Rate), entry 10(i) of Notification No. 11/2017-Central Tax (Rate), section 17(5) of the CGST Act, 2017 and Circulars No. 130/49/2019-GST and 177/09/2022-TRU, as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025) and the ICAI Background Material on GST, Volume I. Rate figures should be read against the rate notification in force on the date of the invoice.