How to Create GST Invoice for Rental Business in India — Complete Guide 2026
Creating a GST invoice for a rental business is more complex than a regular product sale invoice. You need to know the correct SAC code, how to handle security deposits, whether late fees attract GST, and how to structure a rental invoice that is both professional and legally compliant.
This complete guide covers everything a rental business owner in India needs to know about GST invoicing — with the correct format, SAC codes, and practical examples.
Is Your Rental Business Liable for GST?
Not all rental businesses need GST registration. The threshold is:
| Situation | GST Registration | Invoice Type |
|---|---|---|
| Annual rental income below ₹20 lakh | Not mandatory | Simple invoice (non-GST) |
| Annual rental income ₹20-40 lakh | Optional | Can choose GST or non-GST |
| Annual rental income above ₹40 lakh | Mandatory | GST invoice required |
| Any inter-state rental | Mandatory regardless of turnover | GST invoice with IGST |
| Renting to GST-registered businesses | Recommended | GST invoice for their ITC |
If your clients are businesses (B2B), GST registration is strongly recommended even below the threshold — your clients can claim Input Tax Credit on your GST invoice, making your service more attractive.
SAC Codes for Rental Services in India
Every GST invoice for a service must include the correct SAC (Services Accounting Code). Using the wrong SAC code can result in wrong tax rate application and compliance issues.
| Type of Rental | SAC Code | GST Rate |
|---|---|---|
| Machinery and equipment rental | 997319 | 18% |
| Camera and AV equipment rental | 997319 | 18% |
| Furniture and fitting rental | 997322 | 18% |
| Tent and shamiana rental | 997319 | 18% |
| Vehicle rental (with driver) | 996601 | 5% |
| Vehicle rental (without driver) | 996602 | 18% |
| Event equipment rental | 998596 | 18% |
| Medical equipment rental | 997319 | 12% |
| Land and building rental (commercial) | 997212 | 18% |
When in doubt, use SAC 997319 for most equipment rental and consult your CA for specific items. Udyog pre-loads common rental SAC codes so you don't need to look them up every time.
GST Treatment of Security Deposits
This is where most rental business owners get confused. Here is the correct GST treatment:
- •Refundable security deposit collected — NOT subject to GST (it's a liability, not income)
- •Deposit refunded on return in good condition — no GST entry required
- •Deposit forfeited for damage — becomes taxable at the applicable rate
- •Deposit adjusted against late fees — the late fee portion is taxable
- •Deposit adjusted against outstanding rent — taxable as rental income
In Udyog, security deposits are tracked separately from rental income. The system only creates a taxable entry when you mark a deposit as "forfeited" — keeping your GST returns clean.
Is GST Applicable on Late Fees for Rental?
Yes. Late fees charged for delayed return of rented equipment are subject to GST at the same rate as the original rental service. If camera rental attracts 18% GST, then late fees for the camera also attract 18% GST.
Late fees must be included in a proper GST invoice or debit note — not charged informally as cash. Udyog automatically adds GST to late fees calculated by the system.
Rental GST Invoice Format — What to Include
A proper GST rental invoice must include all standard GST fields plus rental-specific information:
- •Your GSTIN, name, and address
- •Client's name, GSTIN (if B2B), and address
- •Invoice number and date
- •Rental period — start date and end date (mandatory for rental invoices)
- •Description of rented equipment with quantity
- •SAC code for each line item
- •Rate per day/week/month
- •Number of rental days
- •Taxable amount (rate × days × quantity)
- •GST rate and amount (CGST+SGST or IGST)
- •Total invoice value
- •Security deposit as a separate non-taxable item
- •Payment terms and return conditions
Sample Rental Invoice — Camera Rental
| Description | SAC | Qty | Days | Rate/Day | Amount |
|---|---|---|---|---|---|
| Sony FX6 Camera Body | 997319 | 1 | 3 | ₹3,500 | ₹10,500 |
| Canon 24-70mm Lens | 997319 | 1 | 3 | ₹800 | ₹2,400 |
| Tripod + Head | 997319 | 1 | 3 | ₹300 | ₹900 |
| Taxable Amount | ₹13,800 | ||||
| CGST 9% | ₹1,242 | ||||
| SGST 9% | ₹1,242 | ||||
| Total Rental Amount | ₹16,284 | ||||
| Security Deposit (non-taxable) | ₹75,000 | ||||
| Total Amount Due | ₹91,284 |
Important
Always issue a separate receipt or acknowledgment for security deposit collection. This protects you legally and makes it clear that the deposit is not part of the taxable rental amount. In Udyog, security deposits appear on the invoice but are clearly marked as non-taxable.
Generate GST-compliant rental invoices automatically with Udyog. Correct SAC codes, automatic CGST/SGST, deposit tracking — all built in.
Try Rental Invoicing Free →Frequently asked questions
Quick answers to common questions.
What SAC code should I use for equipment rental services GST invoice?
For most equipment rental (cameras, machinery, furniture, tents), use SAC code 997319 at 18% GST. For vehicle rental with driver, use 996601 at 5%. Always verify with your CA for your specific equipment type as some items have different classifications.
Do I need to charge GST on security deposits for rental?
No. Refundable security deposits are not subject to GST when collected — they are a liability, not income. GST only applies if the deposit is forfeited. Always show deposits as a separate non-taxable line item on your invoice.
How do I handle GST when a rental client returns equipment late?
Late fees are taxable at the same GST rate as the original rental (typically 18%). Issue a debit note or include late fees in the final settlement invoice with full GST breakdown. In Udyog, late fees are automatically calculated with the correct GST amount.
Can I claim Input Tax Credit on expenses for my rental business?
Yes. If you are GST registered, you can claim ITC on purchases related to your rental business — buying equipment, repairs, insurance, and business expenses. However, ITC on personal use items is blocked. Your CA can help identify eligible ITC claims.
What is the GST rate for tent and shamiana rental services?
Tent and shamiana rental typically attracts 18% GST under SAC 997319 as equipment rental. If you also provide venue (mandap) services, that may be classified differently. Bundled services (tent + setup + catering) may qualify as a composite supply — consult your CA for the correct classification.