GST Council proposes 5% GST rate for EV-based transport and rental services

The Goods and Services Tax (GST) Council has recommended a 5 per cent GST option for passenger transport and rental services using electric vehicles (EVs), subject to restrictions on input tax credit (ITC). The proposal aims to provide greater clarity on the tax treatment of electric mobility services, particularly where operators include battery charging costs in the overall price.

The recommendation covers services provided using EVs with an operator and forms part of a wider set of changes considered at the Council’s 57th meeting.

Which EV services could qualify for 5% GST?

The proposed rate applies to two categories of services involving electric vehicles:

The recommendation also covers cases where the cost of charging the vehicle is included in the total amount charged for the service.

This distinction is important because the proposed 5 per cent rate applies to the bundled transport or rental service rather than to every EV-related activity.

The recommendation does not change the GST rate for standalone electric vehicle charging services, which continue to attract 18 per cent GST.

What about input tax credit?

The 5 per cent GST option comes with a restriction on ITC, which allows businesses to claim credit for GST paid on their expenses. Under this option, businesses may charge a lower GST rate to customers but lose the ability to claim back taxes paid on business costs. As a result, the lower rate may not necessarily mean lower overall costs for operators.

If implemented, the proposal could affect fleet operators, app-based mobility platforms, corporate transport providers and other businesses that use electric vehicles for passenger transport.

The GST Council’s recommendation comes amid rising adoption of electric mobility across India. Electric vehicle retail sales rose 74 per cent year-on-year to a record 333,000 units in September 2026, according to the Federation of Automobile Dealers Associations (Fada).