RCM on Renting of Vehicle

Blocked credit on rcm

Sir, 

Please explain the Blocked credit on RCM..

Thanks 

When it comes to the issuance of an E-Invoice for services where different tax rates apply, such as your case with bus and car rental services, the process should reflect the distinct tax treatments for each service.

For the bus hire charges, where you apply a 12% tax rate, you should issue an E-Invoice that includes this tax rate as part of the total invoice value. This is straightforward since you are the service provider collecting the tax directly from the recipient.

Regarding the cab hire charges, since the 5% GST is payable by the service recipient under the reverse charge mechanism (RCM) as per “Notification 22/2019 dt. 30-09-2019”, you would not include the GST in the E-Invoice. Instead, the service recipient is responsible for paying the GST directly to the government. In this case, the E-Invoice should mention that the GST is payable under RCM, and therefore, not included in the invoice value.

Here’s how you can handle the E-Invoice issuance:

Bus Service: Issue an E-Invoice with 12% GST included in the total invoice value.
Cab Service: Issue an E-Invoice stating that 5% GST is payable by the recipient under RCM, and hence, not included in the invoice value.
It’s important to note that the E-Invoice must be generated through the Invoice Registration Portal (IRP) and should comply with the GST e-invoicing rules12. The E-Invoice should contain all the mandatory fields required under GST, including the distinct tax rates or mentions of RCM as applicable.

Please ensure that you are also adhering to the latest updates and thresholds for E-Invoicing applicability, which may have changed since the notification you referenced.