GST and Input Tax Credit on Laptop Rental: A Finance Team's Guide for Indian Businesses

For finance teams evaluating IT equipment rental for the first time, three questions consistently arise: What GST applies? Can we claim ITC? How does this appear on the balance sheet? This guide answers all three with the precision a finance team needs.

GST on Laptop Rental: The Basics

SAC Code

Laptop and IT equipment rental in India is classified under SAC (Services Accounting Code) 997319 — "Leasing or rental services concerning other machinery and equipment without operator."

GST Rate

18% GST applies on the rental invoice value. This is standard across all IT equipment rental services.

Rentla's GST Invoice

Every Rentla invoice includes:

• SAC code 997319

• 18% GST (9% CGST + 9% SGST for intra-state; 18% IGST for inter-state)

• Rentla's GSTIN

• Your company's GSTIN (provided at account setup)

• Invoice number, date, and period of service

Input Tax Credit (ITC) Eligibility

ITC on laptop rental is available subject to the following conditions:

Blocked credit exceptions that do NOT apply to laptop rental: Section 17(5) blocks ITC on items like food, beverages, outdoor catering, health services, and motor vehicles used for personal transport. IT equipment for business use is not on the blocked list.

Important caveat: ITC eligibility depends on the specific use of the equipment and your company's GST compliance position. Always confirm with your CA before claiming ITC.

Income Tax Treatment of Rental Expenses

Laptop rental payments are deductible as a business expense under Section 37(1) of the Income Tax Act — "any expenditure laid out or expended wholly and exclusively for the purposes of business."

The full monthly rental (excluding GST) is deductible in the financial year it is incurred. There is no depreciation schedule, no asset write-off calculation, and no residual value to manage.

TDS applicability: Rental payments may attract TDS under Section 194-I (rent) if the annual rental to a single vendor exceeds ₹2,40,000. TDS under Section 194-I is 2% for equipment. Rentla's finance team will provide necessary details if your company's annual rental crosses the threshold. Confirm with your CA.

Balance Sheet Treatment Under Ind AS 116

Ind AS 116 (Leases), effective from 1 April 2019, requires certain leases to be recognised on the balance sheet as right-of-use (ROU) assets. This has implications for laptop rental.

Short-Term Lease Exemption (Most Applicable)

Ind AS 116 provides an explicit exemption for short-term leases — defined as leases with a term of 12 months or less at commencement. For rental agreements of 12 months or less:

• No ROU asset is recognised on the balance sheet

• No lease liability is created

• Rental payments are expensed to the P&L as incurred (pure OpEx)

This is the most common situation for Rentla clients on monthly rolling agreements.

For Agreements Above 12 Months

If your rental agreement exceeds 12 months, Ind AS 116 technically requires ROU asset recognition. However, the low-value asset exemption (equipment below a threshold — typically USD 5,000 per asset) also applies to individual laptops under most interpretations.

Practical approach for most SMEs and unlisted companies: If your company does not apply Ind AS 116 (applicable primarily to listed companies and certain large unlisted companies), this is not relevant. For companies that do apply Ind AS 116, your auditor should determine the appropriate treatment based on your specific agreement terms.

What Finance Teams Should Confirm at Setup

When onboarding with Rentla, finance teams should confirm:

Key Takeaways

• Laptop rental attracts 18% GST under SAC 997319 — eligible for ITC for business-purpose rentals

• Full rental payment is deductible as operating expense under Section 37(1) — no depreciation, no asset accounting

• Short-term rentals (12 months or less) are off-balance-sheet under Ind AS 116 — pure OpEx treatment

• TDS under Section 194-I (2%) may apply if annual rental to Rentla exceeds ₹2,40,000 — confirm with your CA

• Rentla provides GSTR-1-compliant invoices with GSTIN, SAC code, and period of service

Frequently Asked Questions

Can we claim ITC on laptop rental if our company is under GST composition scheme?

No. Companies registered under the GST composition scheme cannot claim ITC on any purchases or services. Composition scheme taxpayers pay GST at a flat rate and cannot offset it with input credits. If your company is a regular GST registrant (not composition), ITC on laptop rental is available subject to the conditions above.

How does Rentla handle TDS deductions from rental payments?

If your company deducts TDS on rental payments (applicable when annual rental exceeds ₹2,40,000), provide Rentla with your TAN at the time of account setup. Rentla will reflect the TDS deduction in the reconciliation. TDS certificates (Form 16A) should be issued by your company quarterly as required under the Income Tax Act.

We have a multi-year rental agreement with Rentla. Does Ind AS 116 require us to put it on the balance sheet?

For individual laptops (each valued below approximately ₹3.75 lakh / USD 5,000), the low-value asset exemption under Ind AS 116 generally applies — allowing off-balance-sheet treatment even for multi-year leases. However, the aggregated value of a large laptop fleet may influence this treatment. Confirm with your auditor based on your specific agreement value and company's financial reporting requirements.

Finance questions about laptop rental? Rentla's accounts team provides GST invoices, ITC-supporting documentation, and TDS reconciliation support. Contact Rentla →

*Written by the Rentla Business Team | rentla.in | Updated May 2025*