Tax for mechanics and garages in India

A garage is a business, so use presumptive Section 44AD (6% digital, 8% other), not 44ADA. On GST, split the invoice: repair and servicing labour is a service at 18% with input credit, while spare parts you sell are goods at the parts rate. Registration applies at Rs 20 lakh of service turnover, and fleet or business clients deduct 194C TDS on service contracts.

Presumptive + GST + TDS at a glance

Presumptive taxation

Section:: Sec 44AD
Deemed profit rate:: 6% on digital receipts / 8% on other receipts
Classification:: business

GST treatment

Slab:: 18%
SAC:: 998714 repair/maintenance service (18%); spare parts as goods (parts rate)
Composition eligible:: Yes
Reverse charge (RCM):: Not applicable

TDS exposure

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

A mechanic or garage in India is a business, so presumptive taxation under Section 44AD is the simplest fit, not Section 44ADA. The GST point to get right is the split between labour and parts: repair and servicing labour is a service taxed at 18%, while the spare parts you sell are a supply of goods at the relevant parts rate. Registration applies at Rs 20 lakh of service turnover, and fleet or business clients may deduct TDS under Section 194C.

What business structure do mechanics and garages use?

The common patterns for mechanics and garages are: Sole proprietor, simplest, suits most single-bay garages and mobile mechanics on 44AD, Partnership or LLP, for a multi-bay garage sharing capital and staff, Private limited, for a larger service centre or chain. The right structure depends on revenue, liability exposure, and personal circumstances, covered below.

Income tax: Section 44AD

A garage is a business, so presumptive taxation is under Section 44AD: a deemed 8% of turnover, or 6% on digital receipts, with no detailed books or audit within the limits, up to Rs 2 crore (Rs 3 crore where cash is 5% or less). Section 44ADA does not apply. Note that turnover for 44AD here is your repair revenue plus parts sales, so high-value parts can push turnover up quickly.

A garage (a business) declares deemed profit of 6 or 8% of turnover under Section 44AD. (Income-tax Act 1961 s.44AD (Income-tax Act 2025 s.58))

GST: split labour from parts

This is the point unique to garages. Repair and servicing labour is a service taxed at 18% with input credit, while the spare parts and consumables you sell are a supply of goods at the relevant parts GST rate. Show labour and parts as separate lines on the invoice so each is taxed correctly, a common error is billing everything as one figure at one rate. Registration is required once turnover crosses the threshold (Rs 20 lakh services, or Rs 40 lakh if you are mainly selling parts as goods).

Repair labour is GST 18% (service); spare parts are goods at the parts rate; show them separately on the invoice. (CGST Act 2017 ss.22-24; SAC 998714 (repair service); goods rate (parts))

194C TDS on fleet contracts

When a company, cab fleet or business pays you under a servicing contract, it deducts TDS under Section 194C at 1% (individual or HUF) or 2% (others), above Rs 30,000 single or Rs 1,00,000 aggregate in the year. Quote your PAN to keep the rate at 1 or 2%, and reconcile the credit in Form 26AS and AIS against your return.

A business paying a garage under a service contract deducts 1 or 2% TDS under Section 194C above the thresholds. (Income-tax Act 1961 s.194C (Income-tax Act 2025 s.393))

Allowable expenses

Category	Examples	Tax treatment
Tools and equipment	Lifts, jacks, diagnostic scanners, air tools, welding kit	Deductible; input credit if registered; in deemed profit under 44AD
Spare parts (cost of sale)	Filters, oil, brake pads, belts, batteries, tyres	Cost of sale; input credit on parts if registered (non-composition)
Garage premises	Rent, electricity, water, waste-oil disposal	Deductible if keeping books; in deemed profit under 44AD
Staff wages	Mechanics, helpers, apprentices	Deductible if keeping books; pay over Rs 10,000/day by bank (40A(3))
Licences and insurance	Trade licence, public liability, accountant	Deductible business expense

Vehicle and travel costs

A mobile mechanic's vehicle is a business asset: under regular books claim depreciation plus running costs; under presumptive Section 44AD that is treated as included in the deemed profit. For a fixed garage, vehicle costs are usually minor.

Capital allowances and equipment

On regular books, lifts, diagnostic scanners and garage equipment depreciate in the plant-and-machinery block (generally 15% WDV). Under Section 44AD no separate depreciation is claimed, but keep invoices for the written-down value on any later sale.

Worked example

Imtiaz — Hyderabad, TG

car-repair garage owner (labour plus parts) (2026-27)

Annual turnover Rs 45 lakh: Rs 27 lakh repair labour, Rs 18 lakh spare-parts sales. Mostly digital. A cab-fleet contract deducted 194C TDS. GST-registered.

For income tax, deemed profit under 44AD is 6% of Rs 45 lakh = Rs 2,70,000, below the Rs 4 lakh new-regime exemption, so income tax is nil; he files and reclaims the 194C TDS. For GST, he bills the Rs 27 lakh of labour at 18% (service) and the Rs 18 lakh of parts at the parts goods rate, shown as separate invoice lines, and claims input credit on parts and equipment. Mixing labour and parts into one figure at one rate would be the classic mistake.

Common audit triggers for mechanics and garages

Billing labour and parts as one figure at one GST rate
Cash receipts over 5% of turnover while using the Rs 3 crore 44AD limit
Parts sales pushing turnover above a presumptive or registration threshold unnoticed
Cash receipt of Rs 2 lakh or more from one party in a day (Section 269ST)
Staff wages in cash over Rs 10,000 per person per day (Section 40A(3))
Fleet-contract TDS (194C) in 26AS or AIS not reconciled with income

Frequently asked questions

How do I charge GST on a repair job with parts?+

Split the invoice. The repair and servicing labour is a service taxed at 18% with input credit, and the spare parts you supply are goods at the relevant parts rate. Show labour and parts as separate lines so each is taxed correctly. Billing the whole job as one figure at one rate is a common and avoidable error.

Should a mechanic use 44AD or 44ADA?+

Section 44AD. A garage is a business, not a notified profession, so you declare a deemed 8% of turnover (6% on digital receipts), not the 50% under 44ADA. Remember that your turnover for the presumptive limit includes both repair revenue and parts sales.

Do parts sales count towards my turnover and registration?+

Yes. Spare-parts sales are part of your turnover for the presumptive limit and count towards GST registration (the Rs 40 lakh goods threshold may apply if you mainly sell parts). High-value parts can push turnover up quickly, so track it through the year to register on time and stay within the 44AD limit.

Why did my fleet client deduct TDS?+

A business paying a garage under a servicing contract deducts TDS under Section 194C, 1% for an individual or HUF, 2% otherwise, above Rs 30,000 single or Rs 1,00,000 aggregate. It is withheld against your PAN and shown in Form 26AS and AIS; you reclaim it against your final tax, often as a refund if your presumptive income is low.

Last reviewed: 29 May 2026