The GST Council has proposed a 5 percent tax on passenger transportation and rental services using electric vehicles. This option will not provide input tax credit. Final rules are awaited.
Cab and rental services like Ola-Uber will be cheaper!
Amid efforts to increase the use of electric vehicles, an important proposal has emerged for taxi and car rental services. If you travel by electric car or are planning to rent a car with a driver, this news could prove important for you.
The GST Council has recommended a 5 per cent GST option on passenger transport and rental services provided by electric vehicles.
On which services can the new proposal be applicable?
This proposal applies to services that transport passengers using electric vehicles. Driver-assisted electric vehicle rental services may also be covered. However, to avail of this discounted rate, the cost of battery charging will need to be included in the total customer charge.
ITC will remain banned with 5% GST.
According to the proposal, service providers may have the option to choose a 5% GST rate. However, this option will also come with certain restrictions on input tax credit (ITC). Through ITC, businesses can reduce their tax liability by taking credit for eligible taxes paid on their purchases and expenses. Therefore, service providers will need to consider not only the tax rate, but also the extent of their business's need for input tax credit.
Electric mobility may get a boost
This measure aims to clarify the tax regime for transportation services involving electric vehicles and encourage their commercial use. This could help companies operating electric taxi and rental services plan their costs and taxes.
However, the proposed 5% GST does not automatically guarantee an immediate reduction in passenger fares. The final price will also depend on the service provider's costs and business decisions.
Will GST be reduced on electric vehicle charging also?
It's important to note that this proposal pertains to passenger transportation and rental services provided by electric vehicles. It does not imply a change in the GST rate on separate EV charging services. This is currently a recommendatioan, so its implementation and final rules will have to be awaited.
