In short
| Item | What applies | Since | Good to know |
|---|---|---|---|
| Small car (up to 4 m long, petrol up to 1,200 cc or diesel up to 1,500 cc) | 18% | 22 Sep 2025 | Was 28% + 1% (petrol) or 3% (diesel) cess. |
| Other cars, SUVs and MUVs | 40% | 22 Sep 2025 | Was 28% + 17% to 22% cess. |
| Bus or van for 10 or more people | 18% | 22 Sep 2025 | Was 28%, plus compensation cess on some models (see the timeline). |
| Electric car or bus | 5% | 1 Aug 2019 | Was 12%. |
| Credit on a vehicle, 5% cab-hire option | No | 1 Jul 2017 | The 5% option allows no credit on vehicles. |
| Credit on a vehicle, 18% cab-hire option | Yes, if used to carry passengers | 22 Sep 2025 | Also on the old 12% option. |
| Selling an old cab with no credit claimed | 18% on your margin only | 16 Jan 2025 | 12% or 18% on the margin from 25 Jan 2018. |
Current, upcoming and expired rules
Current is what applies today. Upcoming is notified and starts later. Expired shows what applied before, from which date to which date, for when an old invoice or a notice asks.
Rules as on 31 Oct 2026 (India time). A rule moves between the tabs on its own when its start or end date passes.
| Rule | Rate | Dates | Law and source |
|---|---|---|---|
| Cars: 18% or 40%, no cessSmall cars (petrol, CNG or LPG up to 1,200 cc, or diesel up to 1,500 cc, and up to 4 m long) pay 18%. All other cars, SUVs and MUVs pay 40%. Compensation cess on cars ended. | 18% / 40%Code 8703 | Since 22 Sep 2025 | 9/2025-CT(Rate); 56th GST Council Checked against the text56th GST Council FAQs |
| Buses and vans for 10 or more people: 18%All vehicles designed for ten or more people including the driver pay 18%, with no cess. | 18%Code 8702 | Since 22 Sep 2025 | 9/2025-CT(Rate); 56th GST Council Checked against the text56th GST Council FAQs |
| Autos and motorcycles: 18% or 40%Three-wheelers and motorcycles up to 350 cc pay 18%; motorcycles above 350 cc pay 40%. No cess. | 18% / 40%Code 8703 / 8711 | Since 22 Sep 2025 | 9/2025-CT(Rate); 56th GST Council Checked against the text56th GST Council FAQs |
| Selling an old vehicle: 18% on the margin for allEvery used vehicle sold under the margin scheme now pays 18% on the margin, including smaller cars and EVs.Our reading: We found no change to this from the September 2025 rate reform, but did not see an official consolidated text. | 18% on the margin | Since 16 Jan 2025 | 04/2025-CT(Rate), amending 8/2018-CT(Rate) Checked against the textNotification 04/2025-CT(Rate) |
| Electric vehicles: 5%All electric vehicles, including e-buses and electric two- and three-wheelers, are taxed at 5%. EV chargers also moved to 5%. | 5%Code 8703 / 8702 | Since 1 Aug 2019 | 12/2019-CT(Rate); 36th GST Council Checked against the textNotification 12/2019-CT(Rate) |
| Credit on vehicles and vehicle hire from Feb 2019Credit is blocked only on vehicles for up to 13 people including the driver, unless used for passenger transport, resale or driver training. Their insurance and servicing follow the same rule. Hiring such vehicles is blocked unless you sell the same kind of service, use it as part of a taxable composite or mixed supply, or a law makes the employer provide it. CBIC's Circular 172/04/2022 confirmed that this last exception covers vehicle hire too. Buses above 13 seats are no longer blocked.Our reading: A 2019 West Bengal advance ruling held that monthly car rental with driver is 'renting', not 'transport of passengers', and refused credit on the cars. It binds only that business, but rental-type contracts on the 18% option carry that risk. | — | Since 1 Feb 2019 | CGST Act s.17(5)(a), (ab), (b)(i), as substituted from 1 Feb 2019; Circular 172/04/2022-GST Checked against the textWest Bengal AAR, Reesham Associates (2019)Circular 172/04/2022-GST |
Checked against the government text Official copy not yet online; matched across published copies The law is unclear; this is our reading
On a timeline
Each line is one rule; each bar is one period. Grey has ended, green applies today, amber starts later.
Who can claim GST credit
Input tax credit (ITC) is GST you paid on a purchase that you subtract from the GST you collect. Whether you get it depends on who you are and what you bought.
| Who | Buys | Can claim? | Condition |
|---|---|---|---|
| Cab operator on the 5% option | Cars, servicing, tyres, insurance, software, office rent | No | The 5% option allows no credit except on hire bought from other operators.11/2017-CT(Rate) S.No. 8(vi), 10(i) |
| Cab operator on the 18% option | Cars and buses used to carry passengers | YesOur reading | The vehicle must be used to carry passengers in the business; a car kept for the owner's own use stays blocked. A 2019 West Bengal advance ruling refused this credit on cars given on monthly rental with driver, calling it renting, not passenger transport.CGST Act s.17(5)(a); WB AAR 08/WBAAR/2019-20 |
| Cab operator on the 18% option | Servicing, repairs and insurance of those vehicles, software, office rent | Yes | Used for the business. For servicing and insurance, the vehicle itself must qualify.CGST Act s.16, s.17(5)(ab) |
| Any operator | Diesel, petrol or CNG | No | These fuels are outside GST, so the bill carries no GST to claim.CGST Act s.9(2) |
What courts and rulings have said
Judgments and advance rulings that explain a rule, including ones that pull in different directions. Weigh them by who gave them: a Supreme Court judgment binds every court in India; a High Court’s is followed by courts and tax officers in its State and is persuasive elsewhere; an advance ruling (AAR or AAAR) binds only the business that asked for it and its tax officer (section 103 of the CGST Act).
| Ruling | Question and answer | Weight |
|---|---|---|
| AARM/s New Pandian Travels Pvt Ltd, Chennai (applicant)Tamil Nadu AAR, 30 Nov 2021Order No. 43/AAR/2021 | Can a travel company claim ITC on cars of up to 13 seats that it rents with drivers to corporate clients, including SEZ units?No. Renting cars with drivers is neither a 'further supply of such motor vehicles' nor 'transportation of passengers', because the client's own transport team decides routes, pick-up points and who travels. The same applies to supplies to SEZ units under LUT.“the activity undertaken by the applicant is only renting/hiring of the Motor Vehicles with the operators and not undertaking transportation of passengers”CGST Act s.17(5)(a)(A) and (B); IGST Act s.16TN AAR ruling, official PDF (GST Council) | ClarifiesOnly the applicant and its jurisdictional tax officers (s.103).No appeal found. Same view as West Bengal AAR, Reesham Associates (2019). |
| AARMohana Ghosh, carrying on business under the trade name M/s Reesham AssociatesWest Bengal AAR, 25 Jun 201906/WBAAR/2019-20 dated 10-06-2019, rectified suo motu by 08/WBAAR/2019-20 dated 25-06-2019 (case WBAAR 09 of 2019, applied 28-03-2019) | Is renting cabs with drivers to institutions such as the West Bengal Postal Circle, billed for a fixed number of hours a month, passenger transport (SAC 9964) or renting of a motor vehicle (SAC 9966), and can GST paid on buying the cars be claimed as ITC?It is renting of a motor vehicle (SAC 9966), not passenger transport: the customer pays a fixed monthly amount for the right to use the car whether or not it moves, extra for holidays or extra hours, and kilometres count only to recover fuel. Because the supply is not transportation of passengers, GST paid on buying the cars is not available as ITC under s.17(5)(a).“the recipient is provided with the right to use the vehicle over a specified duration, whether he is a passenger or not”Notif. 11/2017-CT(Rate) S.No. 8 (heading 9964) and S.No. 10(i) (heading 9966); CGST Act s.17(5)(a) and (b)(i) as amended w.e.f. 01-02-2019Rectified ruling 08/WBAAR/2019-20 (GST Council)Original ruling 06/WBAAR/2019-20 (WB Commercial Taxes)StudyCafe report (secondary; quotes 'WBAAR 09 of 2019', which is the case number) | ClarifiesOnly the applicant and its jurisdictional tax officers (CGST Act s.103); persuasive elsewhereNo appeal found. The authority corrected its own order on 25 Jun 2019, and some reports still quote the first version. The Tamil Nadu AAR took the same line in New Pandian Travels (2021); we found no ruling allowing this credit. |
SAC and HSN codes
The code you print on the invoice: SAC for a service, HSN for goods. Since 1 April 2021 an invoice must show at least 4 digits if last year’s turnover was up to ₹5 crore, and 6 digits above that. Descriptions follow the government’s classification of services.
| Code | What it is for | Covers | GST today |
|---|---|---|---|
| 8703HSN | Cars, SUVs and MUVs | Vehicles for fewer than 10 people including the driver | 18% small, 40% others, 5% electric |
| 8702HSN | Buses, vans and tempo travellers | Vehicles for 10 or more people including the driver | 18%, 5% electric |
What a fleet pays on a new vehicle
The rate depends on the vehicle, not on its use. A small car is up to 4 metres (4,000 mm) long, with a petrol, CNG or LPG engine of up to 1,200 cc or a diesel engine of up to 1,500 cc. Every other car, SUV or MUV pays 40%. Vehicles built for ten or more people, counting the driver, are buses and pay 18%.
Value before GST, rounded. Registration, insurance and road tax left out.
| Just before 22 Sep 2025 | From 22 Sep 2025 | |
|---|---|---|
| Compact petrol sedan, ₹7,00,000: rate | 28% + 1% cess | 18% |
| Compact petrol sedan: tax | ₹2,03,000 | ₹1,26,000 |
| 7-seat MUV, 1,462 cc, over 4 m, ₹10,00,000: rate | 28% + 17% cess | 40% |
| 7-seat MUV: tax | ₹4,50,000 | ₹4,00,000 |
| Diesel MUV, 2,393 cc, over 4 m, ₹20,00,000: rate | 28% + 22% cess | 40% |
| Diesel MUV: tax | ₹10,00,000 | ₹8,00,000 |
When the GST on a vehicle comes back as credit
For a vehicle of up to 13 seats, credit is blocked unless you use it to carry passengers in your business, to train drivers, or to resell it. A cab operator carries passengers, so the block does not stop you, but your cab-hire option can:
- On the 18% option (12% until 21 September 2025), the GST on the car is credit you set off against the GST on your bills.
- On the 5% option, you take no credit except on hire bought from other operators, so the GST on the car stays part of its cost.
You buy a ₹7,00,000 compact sedan in November 2026 and pay ₹1,26,000 GST.
| On the 5% option | On the 18% option | |
|---|---|---|
| GST paid on the car | ₹1,26,000 | ₹1,26,000 |
| Credit you can take | ₹0 | ₹1,26,000 |
| GST that stays in the car's cost | ₹1,26,000 | ₹0 |
One caution. A 2019 West Bengal advance ruling treated monthly car rental with driver as “renting”, not “transport of passengers”, and refused credit on the cars. It binds only that business, but if your contracts are monthly rentals, check with your CA. Weigh the credit against what 18% does to your customers, covered in GST on cab hire.
Selling an old cab
If you claimed no input credit on a vehicle, which is always the case on the 5% option, you can pay GST on your margin only when you sell it. The margin is the sale price minus the purchase price, or minus the written-down value if you claimed depreciation. A loss means no GST. Since 16 January 2025 the rate on the margin is 18% for every vehicle.
Its written-down value is ₹3,00,000 and you sell it for ₹3,50,000.
| Sale price | ₹3,50,000 |
| Written-down value | ₹3,00,000 |
| Margin on which GST is worked out (18%) | ₹50,000 |
Sold below the written-down value, there would be no GST at all.
Common questions
Is there still compensation cess on cars?
Not on cars bought from 22 September 2025. The cess on motor vehicles ended when the 18% and 40% rates took effect.
Can a 5% operator claim the GST on a new car?
No. The 5% option allows credit only on hire bought from other operators, so the GST on a vehicle stays a cost.
Is the GST on a bus a blocked credit?
The block covers vehicles of up to 13 seats. A larger bus is outside it, but on the 5% option you still take no credit on it, because of the option's own condition.
What GST do I pay when I sell an old cab?
If you never claimed credit on it, 18% on your margin only (sale price minus purchase price, or minus written-down value if you claimed depreciation). If the sale is at a loss, nothing.
Words used on this page
- GST option (5% or 18%)
- For cab hire with driver and fuel you choose 5% with almost no input credit, or 18% with full input credit. Until 21 Sep 2025 the second option was 12%.
- ITC (input tax credit)
- GST you paid on business purchases that you subtract from the GST you collect.
- Same line of business
- Buying the same kind of service you sell, such as cab hire bought from another operator.
- RCM (reverse charge)
- The customer pays the GST to the government instead of the supplier.
- Body corporate
- A company or an LLP. Proprietors, HUFs and partnership firms are not body corporates.
- SAC / HSN
- The code printed on an invoice for a service (SAC) or for goods (HSN).
- Place of supply
- The state whose GST applies. It decides whether you charge IGST or CGST plus SGST.
- E-invoice / IRN
- Reporting an invoice to the government portal, which returns an Invoice Reference Number and a QR code.
- Pure agent
- Someone who pays an expense on the customer's behalf, with its authority, and recovers it at actual cost.
- TDS
- Tax your customer cuts from a payment to you and deposits against your PAN. You claim it in your income tax return.
- TCS
- Tax a seller collects from the buyer on top of the price, such as on overseas tour packages.