GST on Hiring Non-AC Vehicles to the Indian Army
The Rajasthan Authority for Advance Ruling decided that hiring non-AC vehicles to the Indian Army is a taxable rent-a-cab service, not exempt.
- Ruling
- RAJ/AAR/2018-19/24 dated 02.11.2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Pawanputra Travels asked if hiring non-AC vehicles to the Army is exempt.
- The Authority ruled the service is a taxable rent-a-cab service.
- The service does not qualify as an exempt contract carriage.
In short
Pawanputra Travels asked the Rajasthan Authority for Advance Ruling (AAR) if their non-air-conditioned vehicles hired to the Indian Army were exempt from Goods and Services Tax (GST). The company believed these services qualified as exempt contract carriage services. The Authority disagreed, classifying the activity as a taxable rent-a-cab service instead.
What has changed
How it worked before
Many businesses assumed that hiring non-AC vehicles to government bodies or the military qualified for tax exemptions under the contract carriage category.
What has changed
The ruling clarifies that these services are classified as rent-a-cab services, which are subject to GST. This means businesses cannot claim the exemption they previously hoped for and must collect and pay GST on these contracts.
Who this affects
Travel agencies and transport businesses that hire vehicles to the Indian Army or other government departments.
An example
Imagine a transport firm, 'City Cabs', that hires non-AC buses to a government department. They might wonder if they can stop charging GST based on the Pawanputra Travels ruling. Because this ruling is not a general law, City Cabs cannot automatically apply it to their own business. They must pay GST unless they receive their own specific ruling or clear guidance from their local tax office.
What you should do
If you provide similar services, do not assume you are exempt based on this ruling. An advance ruling only binds the business that asked for it and their specific tax officer. You should consult with your tax advisor to review your specific contract terms and classification before deciding to stop collecting GST.
If you do nothing
If you stop collecting GST based on a ruling that does not apply to you, you risk a tax demand for unpaid dues plus interest and penalties. A tax officer may disagree with your interpretation and treat your failure to collect tax as a violation of the law. It is safer to collect the tax while seeking professional advice to avoid future disputes.
The terms explained
- Rent-a-cab service
- A service where a vehicle is rented out for transport, which is generally subject to GST under current tax rules.
- Contract carriage
- A specific legal term for a vehicle hired to carry passengers for a fixed fee, often used to determine if a service qualifies for tax exemptions.
- Advance ruling
- A formal decision by tax authorities on a specific question asked by a business, which only applies to that specific business.
The ruling in detail
Authority for Advance Ruling
M/s Pawanputra Travels
RAJ/AAR/2018-19/24 dated 02.11.2018 · Rajasthan
Questions before the authority
- The applicable GST rate on supply of non-air conditioned vehicles on hire to Indian Army.
Facts
The applicant provides both air-conditioned and non-air-conditioned vehicles on hire to the Indian Army under a contract. The applicant sought an advance ruling on whether the supply of non-air-conditioned vehicles is exempt from GST under serial number 15 of notification number 12/2017-Central Tax (Rate). The service receiver has refused to reimburse GST on these supplies, claiming they are exempt.
Ruling
| Question | What the authority ruled |
|---|---|
| Supply of non-air conditioned vehicles on hire | Taxable 5% GST without input tax credit or 12% GST with input tax credit |
The Authority ruled that the service provided by the applicant does not qualify as a non-air-conditioned contract carriage and is not exempt under the cited notification. It held that the service falls under the category of rent-a-cab service, which is taxable.
Reasoning
The Authority determined that the applicant's service does not meet the definition of a contract carriage under the Motor Vehicles Act, 1988. It concluded that the service is correctly classified as a rent-a-cab service. Consequently, the exemption under serial number 15 of notification number 12/2017-Central Tax (Rate) is not applicable. The ruling relies on the interpretation of contract carriage and rent-a-cab services in the context of the GST Act and the Motor Vehicles Act.
Provisions relied on
- Section 97(2) of the CGST/SGST Act, 2017
- Section 11 of the CGST Act, 2017
- Section 2(7) of the Motor Vehicles Act, 1988
- Section 2(25) of the Motor Vehicles Act, 1988
- Notification number 12/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This ruling clarifies that hiring vehicles to the Indian Army does not automatically qualify for exemption as a contract carriage. It confirms that such services are classified as **rent-a-cab services** and are subject to GST. Practitioners should note that the classification depends on the specific nature of the vehicle usage and the definition of contract carriage under the Motor Vehicles Act.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/raj.24.2018-19_pawanputra_travels.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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