GST on vehicle rent

The implementation of GST on vehicle given on rent depends on the type of service provider and the recipient of the service. According to the web search results, there are two GST rates applicable for renting of motor vehicles: 12% GST with full input tax credit, and 5% GST with limited input tax credit1.

If the service provider is a body corporate, then he or she is liable to pay GST at 5% on the rent charged from the customer. The customer should bear the responsibility to make the payment and claim input tax credit on the expenses incurred for using the vehicle2.

If the service provider is any person other than a body corporate, then he or she can opt to pay GST at 12% or 5%, depending on whether he or she wants to avail full input tax credit or not. However, if he or she opts for 5%, then he or she must have been paying tax at 5% on such services before October 1, 2019. Otherwise, he or she will be liable to pay reverse charge mechanism (RCM) under which the recipient of the service (i.e., a body corporate) will pay GST at 5% and claim input tax credit