CESTAT: Renting Vehicles on Per-Trip Basis Not Taxable as Supply of Tangible Goods

Last updated: 22 September 2026

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The CESTAT has ruled that renting vehicles on a per-trip basis is not taxable as a supply of tangible goods. The tribunal noted that charging per trip indicates transportation services rather than vehicle rental. Following a previous remand and a subsequent adjudication that also found the appellant not liable under Goods Transport Agency (GTA) services, the service tax demand was set aside.

Court :
Ahmedabad

Brief :
The CESTAT, Ahmedabad, in Universal Distributors v. C.C.E. & S.T., Vadodara-I, Final Order No. 10748/2026 dated 15 September 2026, set aside a service tax demand of ₹8,44,162 raised under the category of “Supply of Tangible Goods Service.”

Citation :
Service Tax Appeal No. 10111 of 2020

The appellant provided vehicles fitted with Hydrogen Cylinder Skids to M/s Raj & Company under an MOU. The department alleged that the vehicles were supplied without transfer of the right of possession and effective control and, therefore, the consideration received was taxable under the Supply of Tangible Goods Service category.

The appellant contended that the vehicles were handed over to the customer, who was responsible for their use, maintenance, drivers, fuel, tyres, batteries and other related expenses. It was also pointed out that charges were recovered on a per-trip basis.

The Tribunal noted that in its earlier orders concerning the same activity, it had observed that charging on a per-trip basis indicated transportation rather than renting of vehicles. The matter had therefore been remanded to examine whether the activity could fall under Goods Transport Agency (GTA) service.

Subsequently, the Additional Commissioner, in the order dated 25 September 2025, held that the appellant was neither a provider of Supply of Tangible Goods Service nor a GTA. The department accepted this order on monetary grounds.

CESTAT Held: Since the activity had already been found not classifiable under Supply of Tangible Goods Service and the subsequent adjudication also held that the appellant was not liable under GTA service, the Tribunal set aside the service tax demand and allowed the appeal.

This AI-generated summary is for informational purposes only. Please view attached original judgment for the complete text and authoritative interpretation.

FAQ :

The main issue was whether renting vehicles on a per-trip basis, fitted with Hydrogen Cylinder Skids, constituted a taxable supply of tangible goods.

The department alleged that the vehicles were supplied without transfer of possession and effective control, making the consideration taxable under the Supply of Tangible Goods Service category.

The appellant argued that the customer was responsible for the vehicles' use, maintenance, drivers, and all related expenses, and that charges were on a per-trip basis.

The Tribunal observed that charging on a per-trip basis suggested transportation services rather than the renting of vehicles.

The Additional Commissioner held that the appellant was neither a provider of Supply of Tangible Goods Service nor a Goods Transport Agency (GTA), and the department accepted this order.

CESTAT set aside the service tax demand and allowed the appeal, as the activity was not classifiable under Supply of Tangible Goods Service and the subsequent adjudication also found no liability under GTA service.