GST on Rent a Car Service

This query is : Resolved

Quick Summary

This discussion clarifies GST implications for car rental businesses where customers drive and pay for fuel. It explores three options: paying 5% GST without Input Tax Credit (ITC), 18% GST with ITC, or opting for composition at 6%. The consensus suggests 5% without ITC is generally best, though 18% with ITC is an alternative. Composition at 6% is not allowed for this type of service.

Krishna

Krishna (Querist)
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30 December 2025 Taxpayer is having a rent a car business. He gives car to customers. Car is driven by customer & customer only fill the fuel. Taxpayer gets the daily rent amount. In this service, taxpayer has option to pay GST @ 5% without ITC ? Or taxpayer has to pay 18% GST with ITC & no GST @ 5% without ITC ? Or is it better he opt composition @ 6% ?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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02 January 2026 GST @ 5% without ITC: ✔ Allowed & generally best

GST @ 18% with ITC: ✔ Allowed (useful in limited cases)

Composition @ 6%: ❌ Not allowed

Recommended option: 5% without ITC for most rent-a-car businesses

Krishna

Krishna (Querist)
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19 January 2026 But Sir; 5% without ITC is available for taxi business or where cost of fuel is included in consideration. Here there is no cost of fuel in consideration. Cost of fuel is borne by the customer. In such cases only gst 18% with ITC available & cannot opt 5% without ITC.

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