The Karnataka Authority of Advance Ruling (AAR) in its recent ruling on the application of M/s Yulu Bikes Pvt. Ltd has held that renting e-bikes and bicycles without an operator can not be taxed at the rate of 5% and 12% respectively as such services cannot be classified under SAC 9973. Rather such services would be subject to GST @ 18% under SAC 9966.
Facts of the Case:
- The Applicant, Yulu Bikes Pvt. Ltd. is engaged in renting vehicles like e-bikes (Miracle), bicycles (Move) in Bengaluru, Karnataka through a technology-driven mobility platform.
- They enter into a contract/agreement with the customers with regard to usage or renting of the e-bikes (Miracle), bicycles (Move), and charge based on the Advent of usage of such vehicles.
- In the Miracle scheme the mobility is provided through a smart dockless electrical vehicle powered by state-of-the-art IoT technology. The vehicle is Light Weight, lighter than a scooter, faster than a bicycle and the applicant is charging 18% GST thereon.
- In the Move scheme, the mobility is provided through a smart lock enabled bicycle powered by GPS, GPRS, and Bluetooth technologies and here also applicant is discharging 18% GST.
Issue on which Ruling was sought:
The applicant sought the advance ruling on the issue of whether the renting of e-bikes (Miracle), bicycles (Move) without operator can be classified under the SAC 9973-Leasing or rental services without operator Sl.No.17 (viia) of Notification No.11/2017 Central Tax (Rate) dated 28th June-2017 as amended.
It may be noted here that as per above entry, the rate of GST applicable, is same rate of tax as
applicable on supply of like goods involving transfer of title in goods and accordingly the rate of GST applicable on renting of e-bikes and bicycles, if they fall in above entry would be 5% (for e-bikes) and 12% (for bi-cycles) instead of GST rate of 18% presently been paid by the Applicant.
Order of Karnataka AAR: Deliberation and Ruling on GST on e-bikes / bicycles
- The Heading 9966 reads as Rental Services of transport vehicles with or without operators. Heading 9973 reads as Leasing or rental services with or without an operator and includes rental or operational leasing of machinery and equipment, personal and household goods, but does not include leasing services of machinery and equipment of personal and household goods on a purely financial service basis. Further subheadings of 9973 pertain to other goods, IPR, etc with no mention of transport goods/vehicle. Thus, the applicant’s services are squarely covered under SAC 9966.
- The specific description is preferred to the general one as per the Explanatory Notes and hence we conclude that the applicant’s activity is classifiable under SAC Heading 9966.
In view of above deliberations, the Authority of Advance Ruling consisting of Dr. M.P. Ravi Prasad and Mashood ur Rehman Farooqui ruled that renting of e-bikes / bicycles without operator cannot be classified under SAC 9973, Leasing or rental services without operator and Sl.no. 17(viia) of Notification no. 11/2017 CT/R) dated 28th June 2017 as amended is not applicable to the instant case. Accordingly GST rate @18% will be continued to be charged as such renting of e-bikes / bicycles would be classified under SAC 9966.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
