GST Rate on Rent a Car Business

This query is : Resolved

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Discussion on GST applicability for self-driven rent-a-car services where customers bear fuel costs. Experts clarified that the concessional 5% GST rate without ITC is not applicable, and the service is taxable at 18% GST with eligibility to claim full ITC.

Krishna

Krishna (Querist)
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20 January 2026 A person having rent a car business. Customer takes car on rent on daily basis, customer itself fills fuels & customer itself drives a car. It’s a self driven car. Is this service chargeable to GST 18% with ITC only or supplier has option to pay GST 5% without ITC ?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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27 January 2026 The option to pay 5% GST without ITC is generally restricted to "Renting of motor vehicles designed to carry passengers where the cost of fuel is included in the consideration."

In your case, since the customer fills the fuel, you do not meet the primary condition for the concessional 5% rate. Therefore:

Applicable Rate: 18% GST (SAC 997329).

Input Tax Credit (ITC): You are eligible to claim Full ITC on your business expenses, including the purchase of the cars (if used for further supply of rental services), maintenance, and other input services.

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Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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27 January 2026 Usually, GST on motor vehicles is "blocked" under Section 17(5) of the CGST Act. However, there is a specific exception for businesses like yours:

ITC is available if the motor vehicle is used for further supply of such vehicles (i.e., renting them out).

This means you can claim the GST paid when you buy the cars for your rental fleet, which significantly reduces your net tax liability.

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