What is state tax in car rental and taxis?

state tax in car rental

Summary

When booking a car rental for your road trip, you pay a lot of charges. However, one of the things that we often overlook when going on an out-of-state road trip is state tax. Many of you might be hearing this term for the first time. Knowing about state taxes will help you make an informed choice and avoid hidden costs. Now that you are here, we will tell you everything about the state tax and why it matters to you. Let's jump into this.

Understanding State Tax in Car Rental and Taxi Services

Every state in India has its own road tax policies, due to which every rental car or taxi with a yellow number plate, when entered into a different state, needs to pay an entry tax. The state tax depends on factors like state, vehicle type, and duration of stay in the state. Along with state tax, a commercial vehicle must obtain a temporary permit or a visitor permit when entering another state. It is to be noted that state tax and toll are two different things. Toll is collected by NHAI, while state tax is collected directly by the state government. 

Why does this matter for you?

This matters to you because it’s you (renter) who has to pay the state tax. The car rental companies only act as a middleman to collect the state tax from you and submit it to the respective state government. This state tax is usually included in your final rental price. Along with many other taxes, this is one tax that you have to pay while travelling interstate. 

Checkpost tax rates

The state tax rates for different states in India are as follows: 

  • Punjab- 240/day
  • Haryana- 100/day small car and 250 larger cars
  • Himachal- 230/day small cars and 540 large cars
  • Uttrakhand- 330/day
  • UP- 180/day

What to Check When you rent or hire a Taxi?

Now you know that state tax is paid by the renter, so you should know how much state tax on car rental you will pay. There are some things that you should check before hiring a car rental company or taxi, as follows: 

Check your invoice carefully:

When you rent a car, the bill usually consists of the actual car rent, state tax (GST), and other fees (airport fees, insurance, service fee, etc). In many states, car rental companies must show the car rental state tax separately from the actual rent on the bill. This helps you see how much portion is exactly going to the government. If their are any hidden charges in car rental, ask for the breakup to avoid confusion later and maintain transparency. 

Short term vs Long term rentals:

Whether or not state tax will be applicable depends on the state you are entering. So short term rental vs long term rental rates may differ. There are some states that only levy car rental state tax for short-term rentals (30 days). That’s because short-term rentals are considered temporary transactions, while long-term leases usually fall under different taxation rules. 

Additional surcharges:

If you are picking up your car rental from an airport or major transport hub, you might expect surcharges besides state tax. These include airport concession fees, tourism or city taxes, and municipal service charges. These types of surgeries are not controlled by car rental companies but set by local authorities. 

Bottom Line

State tax is a government-imposed tax that has to be paid every time a vehicle enters a new state. It varies from state to state in India. This state tax is completely borne by the renter, not the car rental company. The car rent company only acts as an agent that collects state tax on behalf of the state government. It might sound like an added expense, but it is actually a legal requirement and not a hidden fee. Now, since you know about state tax in car rental, when booking a car from next time for interstate travel, you will be able to make a better decision. 

Frequently Asked Questions
FAQ's

Got questions? We have the perfect answers for you!

  • 1. What is state tax in car rental?

    A state tax is a mandatory tax to be paid whenever a car from one state enters another. 

  • 2. What are the prices of the checkpost state tax on car rental?

    The prices vary from state to state.

    • Punjab- 240/day
    • Haryana- 100/day small car and 250 larger cars
    • Himachal- 230/day small cars and 540 large cars
    • Uttrakhand- 330/day
    • UP- 180/day
  • 3. Who has to pay state tax on a car rental?

    A renter or the customer has to pay the state tax when booking a car rental or taxi. 

  • 4. Can we take a rental car out of the state?

    Yes, you can take the car out of state by paying the state tax.  But some car rental companies doesn't allow renters to travel interstate.

  • 5. Does taxi's have to pay state taxes?

    Yes, cabs have to pay state taxes when entering a different state.