Rent a cab

[Asked by Guest]

Hello everyone,

I am new to this forum, I would like to get some clarity on The GST regime.

We are Rent a cab services, can we bill under the 5% composite plan and the 12% for input tax credits, all our vendor and clients are expecting different GST ones and we have purchased new vehicles and plan to purchase one more soon so we are not aware how to bill!

Also are we expecting one tax slab even in this industry!

Please help!

[Nash Industries I Pvt Ltd]

Suggest not to opt for composite scheme. Please pay the regular tax and take the credit of the tax paid on the vehicles purchased.

Regards

S.Ramaswamy

[ANITA BHADRA]

Dear Sir

Answer to your query consists of two parts .

First one is billing - Both the options are available with you . You can bill at 5 % GST with no ITC or 12% GST with ITC (Notification No. 20/2017-Central Tax (Rate) dated 22.08.17.)

Second one - purchase of new car - Section 17(5) of GST Act specifically states - ITC not available for
motor vehicles and other conveyances EXCEPT when they are used––transportation of passengers.

Since you are in business of rent a cab and motor vehicle purchased will be used for transportation of vehicle , you can claim ITC on purchase of new vehicle .

Regards

[CSSANJAY MALHOTRA]

My submission would be to opt for GST 5% without ITC as hardly less than 10% segment would opt for 12% GST.

Reason being is that Input Tax Credit is not available to Industry as is specified in negative List except where the use of Cab is statutorily required under the Act.

Both the Options are available and ITC is available to you on proportionate basis on the basis of Turnover.

You have to take Business Call considering Cost benefit analysis / Market share.

[Ganeshan Kalyani]

I agree with the views of the experts.

[Ganeshan Kalyani]

Sir if you opt for 12% then input tax credit on all inputs purchased in course or furtherance of business is eligible except few ineligible credits. And if you opt to pay tax @ 5% then input tax credit is not eligible because the tax you are paying in lower than the regular rate.

AI Summary

Input Tax Credit availability affects rent-a-cab choice: composite rate excludes ITC, regular rate allows ITC on passenger vehicles.
Rent-a-cab suppliers must choose between a composite rate with no entitlement to input tax credit and the regular rate with entitlement to input tax credit. Motor vehicles are generally ineligible for input tax credit, but the rule expressly permits credit where vehicles are used for transportation of passengers; therefore passenger-carrying cabs purchased for the business can attract input tax credit under the regular-rate option, requiring a cost-benefit analysis to decide between competitive pricing and claiming credits.