Car rent

Hi Akshay,

Here’s how GST applies when you rent your car to your friend, who then uses it for business:

1. Is GST applicable on renting your car?

• Yes, renting of motor vehicles is a supply of service under GST and is taxable.

• If you are renting out your personal car (used for personal use) and your aggregate turnover exceeds ₹20 lakhs (₹10 lakhs in some states), you must register for GST and charge GST on rent.

2. Is GST applicable on your transaction with your friend?

• Yes, if your friend is paying you rent for the car, you need to charge GST on this supply of service.

• The GST rate on renting of motor vehicles for business purposes is 18%.

3. Is it under Reverse Charge Mechanism (RCM)?

• No, reverse charge will not apply here on the recipient (your friend).

• As a supplier of the service (car rental), you must charge and collect GST from your friend.

• RCM applies in certain cases but not for renting vehicles to a friend/business.

4. Summary:

Important Note:

• If you are not a registered GST taxpayer (turnover below threshold), no GST needs to be charged.

• Your friend (recipient) may claim input tax credit only if you issue a valid GST invoice.