GST Council Meets Today — Input Tax Credit Relief for Cars and EV Parity on the Table
By AUTOASTRA Editorial · 8 Oct 2026 · Policy
The GST Council meets on 8 October to consider input tax credit on cars used by businesses and full tax parity for EVs in transport and rental services, with rates left untouched.
A Business-Buyer Reset, Not a Price Cut
The GST Council meets on 8 October with a long list of ease-of-doing-business proposals, and tucked inside it is a set of changes that could matter more to fleet operators and companies than any headline rate cut. The Centre is proposing to widen input tax credit, or ITC, on motor vehicles and on the running costs that go with them — insurance, servicing, repairs and maintenance.
Today a business generally cannot claim ITC on passenger vehicles that seat up to 13 people, including the driver, unless the vehicle is used for specific purposes such as resale, passenger transport or driving training. Credit on insurance, servicing and repairs is also restricted in those cases. The proposal would open up ITC for a far wider set of business uses.
EVs Move to the Same Footing as Petrol Cars
The most quietly significant item is parity for electric vehicles. For passenger transport and the renting of vehicles, operators can currently choose a lower rate with restricted credit or 18 per cent with full ITC. The proposal extends the same choice to EVs, which today sit in the same blocked category as conventional cars despite paying a much lower tax on purchase.
Other proposals before the Council cover vehicle leasing and rentals, demonstration vehicles, the second-hand vehicle business and deliveries ordered through e-commerce platforms. None of this touches the headline GST rates on cars, which stay as they are.
| Item | Current Position | Proposed Change |
|---|---|---|
| ITC on cars (up to 13 seats) | Blocked for most businesses | Allowed in far more business uses |
| ITC on insurance, servicing, repairs | Restricted | Credit proposed on running costs |
| EVs in transport and rental | Same blocked treatment as petrol | Same 5 percent or 18 percent options as ICE |
| Interstate goods checks | Repeated physical checks | Single-point check for documented loads |
| E-commerce delivery | 18 percent GST | Uniform 5 percent without ITC |
What This Means for You
If you buy a car as an individual, none of this changes your invoice today. But if you run a small business, a fleet or a self-drive rental, ITC on the vehicle and its running costs can meaningfully change the cost of ownership, and the EV parity move gives operators a reason to shift fleets to electric without a tax penalty. Watch the fine print once the Council's decisions are notified, since these changes are expected to roll out in phases through 2027. Fleet buyers can estimate running costs on our EV calculator and compare models on our comparison tool.
(Sources: GST Council and Ministry of Finance proposals, Business Standard, The Economic Times and The Hindu, 5-7 October 2026. Images: electric car charging stations, CC BY-SA 4.0 via Wikimedia Commons.)
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