GST on Buses and Cars on hire

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Kaushik (Querist)
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28 August 2017 Hi... I am into business of giving Buses and Cars on rent to people. I own also and I take from outside also for this purpose. want to know SAC code and rate for both input credit and non credit. I am charging under 996601 @ 5% and now has asked to charge 12% if I want credit of it. Experts are requested to send their views. Thanks

Kaushik

Kaushik (Querist)
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01 September 2017 Just to clarify I give on Rent means I give on hire as and when required and not on fix contract

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2024 For the business of providing buses and cars on hire, GST rates and rules differ depending on the nature of the service and whether you’re taking input tax credit (ITC) on your purchases. Here’s a detailed breakdown:

### **1. GST Rates and SAC Codes:**

#### **a. Vehicles for Hire:**

1. **Renting of Motor Vehicles (Cars, Buses, etc.):**
- **SAC Code:** 996601
- **GST Rate:**
- **5% GST:** If the vehicles are rented out without a driver. This rate applies generally to the renting of vehicles used for transportation.
- **12% GST:** If you are providing the vehicle along with a driver (as part of a composite or mixed supply). However, if you do not provide a driver, the rate typically remains 5%.

2. **Input Tax Credit (ITC):**
- **5% Rate:** When you charge GST at 5% for the hiring of vehicles without a driver, ITC on inputs and input services used for providing this service is not available.
- **12% Rate:** If you charge GST at 12% (which can include the cost of hiring the vehicle with a driver), you are eligible to claim ITC on the inputs and input services used in the provision of this service.

#### **b. Renting of Vehicles (with Driver):**

- **SAC Code:** 996601
- **GST Rate:** 12% if the renting includes a driver as part of the service.

### **2. Determining the Rate and Claiming ITC:**

- **If Charging 5% GST:**
- You cannot claim ITC on the input tax paid on expenses related to providing the rental service. This rate is usually opted for if you provide only the vehicle without a driver.

- **If Charging 12% GST:**
- You can claim ITC on the GST paid on input purchases related to the provision of the service, such as fuel, maintenance, and other related expenses. This rate applies if the service provided is more comprehensive (including a driver or other add-ons).

### **3. Practical Considerations:**

- **If You Are Renting Vehicles Without a Driver:** Stick with the 5% GST rate and forego ITC, as this rate is simpler and suits many rental models.
- **If You Include a Driver or Offer a More Comprehensive Service:** Charge 12% GST to avail ITC on your inputs.

### **Summary:**

- **For renting out vehicles (without a driver),** charge GST at **5%** and you cannot claim ITC.
- **For renting out vehicles (with a driver),** charge GST at **12%** and you can claim ITC on related expenses.

### **References and Regulations:**

- **Notification No. 11/2017-Central Tax (Rate):** Defines the GST rates for various services, including vehicle rentals.
- **SAC Code 996601:** Covers rental of vehicles and the applicable GST rates based on the nature of the service provided.

### **Action Steps:**

1. **Evaluate Your Service Model:** Determine if you provide just the vehicle or the vehicle with a driver.
2. **Adjust GST Rates Accordingly:** Apply the appropriate GST rate based on your service model.
3. **Maintain Proper Documentation:** Ensure all invoices and GST returns reflect the correct rate and that ITC is claimed as applicable.

For precise compliance and optimization, consider consulting with a GST professional or tax advisor.

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