GST & Billing Rules for Corporate Cab Vendors in India

Summary

Corporate cab services in India are taxed under GST as renting of a passenger motor vehicle, and the rate is either 5% without input tax credit or a higher rate with full input tax credit, with the vendor’s choice deciding who bears the tax. The rule most companies miss is the reverse charge mechanism: when a non-body-corporate cab vendor (an individual, proprietor or partnership firm) supplies vehicles to a company and charges 5%, the company itself must pay that GST to the government, not the vendor. A second trap is input tax credit – GST paid on employee cab hire is usually blocked under Section 17(5), so it becomes a real cost rather than a recoverable one. This guide explains the rate options, the reverse charge rule, what a compliant corporate cab invoice must show, and the TDS position, for finance and admin teams. Because GST rates and thresholds change, confirm the current position with a qualified chartered accountant; cabrentalhub.in is a place to compare cab options, not a substitute for tax advice.

Key Takeaways

Corporate cab hire with a driver and fuel is taxed as renting of a motor vehicle, at 5% without input tax credit or a higher rate with full credit, chosen by the vendor.
The reverse charge mechanism can make the company, not the vendor, liable to pay the GST, specifically when a non-body-corporate vendor charges 5% to a body corporate.
Input tax credit on employee cab GST is generally blocked under Section 17(5), so in most cases the GST is an unrecoverable cost – even when paid under reverse charge.
A compliant corporate cab invoice must show GSTIN, SAC code, the GST rate applied, and whether reverse charge applies, or the company cannot account for it correctly.
TDS under Section 194C applies to the cab contract payment, separately from GST, at 1% or 2% depending on the vendor’s constitution.
App-based aggregator rides follow a different rule, where the platform collects GST and the operator has no rate choice.

Note: GST rates and thresholds change, and several transport slabs were revised in September 2025. This article explains the structure and mechanism, not a guaranteed current rate. Confirm the applicable rate and your eligibility with a qualified chartered accountant before acting.

How is GST charged on corporate cab services?

GST on corporate cab services is charged as renting of a passenger motor vehicle where the vehicle comes with a driver and the fare includes fuel, and the vendor applies one of two rate options. The service is classified under the passenger-transport and vehicle-rental service codes (SAC 9964 / 9966).

The two options are a lower rate of 5% under which the vendor cannot claim full input tax credit, and a higher rate with full input tax credit available to the vendor. The higher-rate option has historically been 12%, but the September 2025 GST rate revision changed several transport slabs, so the current higher rate should be confirmed against the latest notification or with a chartered accountant before it is written into a contract. The vendor’s choice of rate is not cosmetic: it determines both the vendor’s own credit position and, as the next section explains, whether the company has to pay the tax itself.

For the operational side of setting up this kind of arrangement – the contract, SLA and billing basis – see this explainer on how a corporate cab contract works.

What is the reverse charge mechanism on cab hire, and when does the company pay GST?

The reverse charge mechanism (RCM) is a GST rule under which the recipient of a service, rather than the supplier, pays the tax to the government. On cab hire it applies in a specific situation, and it is the rule companies most often get wrong.

Under Notification 22/2019-Central Tax (Rate), effective 1 October 2019, reverse charge applies to the renting of a passenger motor vehicle when all of these conditions are met:

The supplier is not a body corporate – for example an individual, proprietorship, HUF or partnership firm.
The recipient is a body corporate – for example a private limited or public limited company.
The fuel cost is included in the fare charged.
The supplier charges 5% and does not charge the higher rate on the invoice.

When all four hold, the company (the body corporate recipient) must register for GST if not already registered, and pay the 5% GST directly to the government. The vendor issues an invoice without charging that tax. If instead the vendor charges the higher rate under forward charge, reverse charge does not apply and the vendor pays the tax in the normal way.

A worked reverse-charge example

Consider an individual cab operator (a non-body-corporate) hiring out cars with drivers to a private limited company for employee transport, at ₹60,000 a month with fuel included, charging 5% and not the higher rate. Reverse charge is triggered, so the company pays ₹3,000 (5% of ₹60,000) as GST directly to the government, and the operator’s invoice shows the fare without adding tax. The figures are illustrative; the mechanism, not the exact number, is the point.

When does reverse charge NOT apply?

Reverse charge on cab hire does not apply in these cases: the vendor is itself a body corporate (then the vendor pays under forward charge); the vendor charges the higher rate with full credit (forward charge); or the fuel is arranged separately by the company and not included in the fare. A company hiring from an incorporated fleet operator, therefore, is usually not in reverse-charge territory – but it must confirm the vendor’s constitution, because the liability follows the law regardless of what the contract assumes.

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Can a company claim input tax credit on employee cab GST?

In most cases a company cannot claim input tax credit on GST paid for employee cab services, because Section 17(5) of the CGST Act blocks credit on the renting or hiring of motor vehicles with an approved seating capacity of up to 13 persons, including the driver. This block applies even when the company has paid the GST itself under reverse charge, which means the tax becomes an additional, unrecoverable cost.

There are limited exceptions. Credit may be available where providing the transport is obligatory for the employer under a law in force, or where the vehicle is used in the same line of business, or for onward supply. Whether a specific arrangement qualifies is a fact-and-law question that should be checked with a chartered accountant rather than assumed. The practical planning point is simple: for ordinary employee pick-and-drop, budget on the basis that the GST is a cost, not a credit.

Because that GST is usually a sunk cost, the total-cost comparison between running cabs and other models has to count it in. That comparison is worked through in this analysis of employee cab service vs fuel reimbursement.

Forward charge vs reverse charge: who pays the GST?

The table below shows who is liable to pay GST in the common corporate cab scenarios. “Body corporate” means an incorporated company; “non-body-corporate” means an individual, proprietor, HUF or partnership firm.

Scenario	Rate charged	Who pays GST	Company can claim ITC?
Non-body-corporate vendor → company	5%, fuel included	Company, under reverse charge	Usually no (Sec 17(5))
Non-body-corporate vendor → company	Higher rate, full ITC	Vendor, forward charge	Usually no for employee transport
Body-corporate vendor → company	5% or higher	Vendor, forward charge	Usually no for employee transport
App aggregator ride (Ola/Uber etc.)	5% via platform	Platform collects and pays	Usually no
Fuel arranged by company, not in fare	Per contract	Not reverse charge on this basis	Depends on facts

The single most important row for a finance team is the first: a small, unincorporated vendor charging 5% shifts the tax-payment obligation onto the company. Missing this is a common source of unpaid-RCM exposure across multiple years, because it never appears as a charge on the vendor’s invoice.

What must a compliant corporate cab invoice contain?

A compliant corporate cab invoice must contain the vendor’s GSTIN, the invoice number and date, the company’s details, the SAC code, the taxable value, the GST rate and amount, and a clear statement of whether the tax is payable under reverse charge. If reverse charge applies, the invoice should say so and should not add the tax to the total, because under reverse charge the supplier does not collect it.

For the recurring monthly billing typical of corporate contracts, the invoice should also reconcile to the trip sheets or GPS logs and separate the base fare from extra-kilometre, night-allowance, detention, toll and parking charges, each of which may carry its own treatment. A vague single-line invoice makes both GST accounting and internal audit difficult. Fixing the billing basis and the extra-charge heads in the contract before the first invoice is raised is what makes a clean invoice possible.

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Does TDS apply to corporate cab payments?

Yes, TDS under Section 194C of the Income Tax Act generally applies to payments made under a corporate cab contract, because it is a payment to a contractor for carrying out work. This is an income-tax deduction and is separate from GST; a company may have both a TDS obligation and a reverse-charge GST obligation on the same vendor.

The standard rates under Section 194C are 1% where the vendor is an individual or HUF and 2% for other entities, subject to the prevailing threshold limits and to the vendor furnishing a PAN. TDS is deducted on the payment and deposited against the vendor’s account. Confirm the current rates, thresholds and any changes with your finance team, since income-tax provisions are amended periodically.

Aggregator rides vs a direct cab vendor: how does the GST differ?

The GST differs because an app-based aggregator collects the tax through the platform, while a direct vendor bills the company under forward or reverse charge. For rides booked through an electronic commerce operator such as a ride-hailing app, the platform is responsible for collecting and paying GST on the fare, and the individual driver-operator has no choice of rate. This is a different mechanism from a negotiated corporate contract with a fleet vendor.

For a company running regular, fixed-route employee transport, a direct contract with a cab vendor usually gives better cost control, a proper monthly invoice, and an SLA – but it also brings the reverse-charge and TDS obligations described above into the company’s own compliance. Aggregator rides shift the GST collection to the platform but rarely suit dense, scheduled commuting. Many companies use a direct vendor for the core routes – a Monthly cab service from faridabad to noida run, a monthly cab service in Ghaziabad contract, or a monthy cab service in delhi arrangement – and keep aggregator rides only for ad-hoc trips.

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A compliance checklist for finance and admin teams

Run this checklist when onboarding or auditing a corporate cab vendor:

Confirm the vendor’s constitution – body corporate or not – because it decides whether reverse charge applies.
Confirm the rate on the invoice – 5% or the higher rate – and match it to the reverse-charge rule.
If reverse charge applies, register and account for it, and pay the GST directly rather than expecting it on the vendor’s invoice.
Treat the GST as a cost, not a credit, for ordinary employee transport, unless a chartered accountant confirms an exception.
Check the invoice fields – GSTIN, SAC code, rate, reverse-charge statement, and a breakdown of extra charges.
Set up TDS deduction under Section 194C at the correct rate against the vendor’s PAN.
Reconcile monthly invoices to trip logs before payment.
Verify the current GST rate against the latest notification, since transport slabs were revised in September 2025.

Formalising these checks alongside the transport rules in an employee transport policy template keeps finance, admin and HR aligned on one set of expectations.

Conclusion

For a company hiring cabs for employees in India, three GST facts matter most: the service is taxed as renting of a motor vehicle at 5% without credit or a higher rate with credit; the reverse charge mechanism can make the company itself liable to pay the 5% when the vendor is unincorporated and charges 5%; and the resulting GST is usually a blocked, unrecoverable cost under Section 17(5). Add the separate TDS obligation under Section 194C, and confirm the vendor’s constitution and the current rate before signing anything. Because GST rates and thresholds change – and were revised in September 2025 – treat this guide as a framework and verify the specifics with a qualified chartered accountant. Companies comparing cab options while they get the compliance right, from a daily cab service for office to monthly corporate arrangements, and reviewing the wider set of employee transportation solutions, can benchmark packages on cabrentalhub.in.

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Frequently Asked Questions (FAQs)

What GST rate applies to corporate cab services in India?

Corporate cab services with a driver and fuel included are taxed as renting of a passenger motor vehicle, at 5% without input tax credit or a higher rate with full input tax credit, chosen by the vendor. The higher rate has historically been 12%, but the September 2025 GST revision changed several transport slabs, so the current rate should be confirmed against the latest notification. The vendor’s rate choice also affects who is liable to pay the tax.

When does a company have to pay GST on cab hire under reverse charge?

A company pays GST under reverse charge when a non-body-corporate vendor – an individual, proprietor or partnership firm – supplies passenger vehicles with fuel included, charges 5%, and does not charge the higher rate. In that case the company pays the 5% GST directly to the government and the vendor’s invoice does not add it. Reverse charge does not apply if the vendor is a body corporate or charges the higher rate under forward charge.

Can a company claim input tax credit on employee cab GST?

In most cases a company cannot claim input tax credit on GST paid for employee cab services, because Section 17(5) of the CGST Act blocks credit on renting motor vehicles with seating capacity up to 13 persons. This block applies even when the company pays the GST under reverse charge, making it an unrecoverable cost. Limited exceptions exist, such as where the transport is obligatory under a law, and should be checked with a chartered accountant.

What details must a corporate cab invoice show for GST?

A corporate cab invoice must show the vendor’s GSTIN, invoice number and date, the recipient’s details, the SAC code, the taxable value, the GST rate and amount, and whether reverse charge applies. If reverse charge applies, the invoice should state this and not add the tax to the total. Recurring monthly invoices should also break out extra-kilometre, night-allowance, toll and parking charges separately.

Is TDS deducted on payments to a cab vendor?

Yes, TDS under Section 194C of the Income Tax Act generally applies to corporate cab contract payments, at 1% for an individual or HUF vendor and 2% for other entities, subject to threshold limits and PAN. This is an income-tax deduction separate from GST, so a company may owe both TDS and reverse-charge GST on the same vendor. Current rates and thresholds should be confirmed with your finance team.

Do Ola and Uber rides for staff have different GST rules?

Yes, rides booked through app-based aggregators are taxed differently, because the platform collects and pays the GST on the fare and the individual operator has no choice of rate. A direct contract with a cab vendor instead brings forward-charge or reverse-charge obligations and TDS into the company’s own compliance. Aggregator rides suit ad-hoc travel, while direct vendors suit regular, fixed-route employee transport.

Is the GST paid on cabs a cost or something we can recover?

For ordinary employee pick-and-drop, GST paid on cabs is usually a cost rather than a recoverable credit, because Section 17(5) blocks the input tax credit. This applies whether the vendor charges the tax or the company pays it under reverse charge. Any exception to this – for example where transport is legally obligatory – should be confirmed with a chartered accountant before being relied on.

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