GST for a car workshop: what your CA wishes you already knew.

Two things on one bill

A workshop bill is almost always two things at once. Labour is a service. Parts are goods. They are usually taxed at different rates.

The government has said this directly about car servicing. A CBIC circular from June 2018 answers the question of servicing that involves both spare parts and labour: where the value of the goods and the value of the services are shown separately, each is taxed at its own rate.

So the first rule is the simplest one. Parts and labour go on separate lines, every time. A bill that says “service: ₹12,000” and nothing else is the bill that gets questioned.

When you have to register

Under the CGST Act, you must register once your turnover in a financial year crosses ₹20 lakh. In the special category states the figure is ₹10 lakh, with some exceptions the law allows. Some businesses must register whatever their turnover, including anyone selling goods to a customer in another state.

Many workshops register before they have to. Fleet and company customers often want a proper GST bill, and registering is what lets you claim back the tax on the parts you buy.

Tax invoice or bill of supply

If you are registered in the regular way, each taxable sale needs a tax invoice: your GSTIN, the customer's GSTIN if they have one, the HSN or SAC code on each line, the taxable value, and the tax split into CGST and SGST, or IGST for a customer in another state.

A workshop in the composition scheme cannot charge GST to its customers and cannot claim input credit. It issues a bill of supply instead, and so does any business billing something on which no GST applies.

Which document you issue is not a matter of style. The wrong one on the wrong sale becomes a problem months later. A system that raises the right document from the job card takes that choice away from whoever is at the counter.

Input credit is where the money is

Every part you buy from a registered supplier carries GST you have already paid. If you are in the regular scheme, that tax is input credit: you set it against the tax you collect on your own bills. The conditions are simple to state. You hold a proper purchase invoice, you received the goods, and the supplier has reported the sale.

For a workshop where parts are a large share of the bill, this is real money. It is also why purchase invoices belong in your system against each supplier, not in a carton under the counter. Credit you cannot prove is credit you do not get.

What your CA needs from you

• Every month or quarter: your sales, bill by bill for registered customers and in summary for everyone else, so your CA can file your returns and pay the tax. Smaller businesses may be allowed to file quarterly. Your CA will know whether you qualify.
• Your purchase bills, so input credit can be claimed.
• Your expenses, in one list.
• At year end, a match between what was filed during the year and what your books say. The workshops that get through this easily kept their bills, payments and purchases in one place all year.

If your system can give your CA these as files they can import, month-end is one email. If it gives them a bag of counterfoils, month-end is a week.

Three habits that prevent most notices

1. Never write a bill by hand, outside your system, for a “small” job. A break in your bill numbers is the first thing an officer notices.
2. Record part-payments and balances against the bill they belong to, so the tax you charged and the tax you collected agree.
3. Send your CA proper files, not screenshots.

Rates, limits and schemes change. Check the current figures with your CA before you rely on any number here. The three habits do not change.

Sources

The legal points above were checked against these official pages on 16 October 2026. Rules change, so check the current versions before you rely on them.

• CBIC Circular No. 47/21/2018-GST, 8 June 2018 (question 2: servicing of cars)
• CGST Act, section 22: persons liable for registration
• CGST Act, section 24: compulsory registration in certain cases
• CGST Act, section 10: composition levy
• CGST Act, section 16: eligibility and conditions for input tax credit

Karyo Studio builds workshop systems that raise the right bill from the job card and give your CA clean files every month. If you would like one scoped, you will have a written proposal with a fixed scope, a fixed price and a delivery date within three working days of the first conversation. See what we build for car businesses.