18% GST Applicable on Car Rental Services: AAR [Read Order]

In a recent ruling, the Karnataka Authority for Advance Rulings ( AAR ) clarified that car rental services will attract an 18% Goods and Services Tax ( GST ), resolving uncertainty about the tax treatment of these services under GST.

This ruling came in response to an application from Indus Motors Pvt Ltd, a car rental service provider seeking clarity on the applicable GST rate for their services.

Become a Certified GST Expert: Empower Your Career Enroll Now

The bench, comprising M.P. Ravi Prasad and Kiran Reddy T., analyzed the case based on GST laws and relevant notifications. The AAR referred to Notification No. 11/2017-Central Tax (Rate), dated June 28, 2017, and its subsequent amendments, which prescribe the tax rates for various services, including "rent-a-cab" services. As per Entry 10(ii) of the Notification, "rent-a-cab" services are taxable at 18% under GST when the supplier does not avail of the input tax credit (ITC).

Additionally, the AAR clarified that this 18% tax rate applies uniformly, irrespective of whether the service is provided to corporate entities or individuals. The decisive factor is the nature of the service, which involves supplying a vehicle for transportation without transferring the right to operate the vehicle to the customer.

Become a Certified GST Expert: Empower Your Career Enroll Now

In result, the AAR concluded that the applicant's services squarely fall under the scope of "rent-a-cab" as described in the notifications, thereby resolving the applicant's query.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates