Looking for expert help with GST and income tax for tourist bus operators and bus hire owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Bus hire with driver and fuel is 5% GST (credit only on input services from other operators) or 18% with full credit. The higher option was 12% until 22 September 2025 (Notifications 11/2017 and 15/2025-CT(Rate)).
- Hire to a state transport undertaking (TGSRTC, APSRTC, KSRTC and the like) and school student transport are exempt. Non-AC charter and tourist trips are not exempt (Notification 12/2017-CT(Rate)).
- If you're a proprietor or firm and bill a company without charging the higher rate, the company pays GST under reverse charge, and you charge none.
- Corporate clients deduct 194C TDS at 1% or 2% above Rs 30,000 a bill or Rs 1 lakh a year. Bus owners can't use the small-transporter no-TDS declaration.
- For FY 2025-26, Section 44AD (6% of digital receipts, 8% of cash) is open to bus operators. With books, buses on hire get 30% depreciation.
What is the GST rate on bus hire in India? Renting a bus with the cost of fuel included in the price is taxed at 5% GST, with credit allowed only on input services bought from other operators, or at 18% with full input tax credit, under S. No. 10(i) of Notification 11/2017-Central Tax (Rate). The 18% option replaced 12% from 22 September 2025 (Notification 15/2025-CT(Rate)).
Bus operators juggle more GST answers than most transport businesses. A wedding party, a software company's staff shuttle, a school, the state road transport corporation and a pilgrimage group can all hire the same 40-seater in one month, and each job can carry a different GST result: 5%, 18%, reverse charge or no tax at all. This guide works through each one using the CBIC notifications, then covers the TDS your clients deduct and how your income is taxed for FY 2025-26 (AY 2026-27), with the Income-tax Act 2025 sections that apply from 1 April 2026. If you run cabs and tempo travellers rather than buses, our cab and taxi GST guide covers the motorcab rules.
Which GST rate applies to your bus trips?
Start with how you bill, because the notifications tax "renting a bus" and "carrying passengers" under different entries.
Hiring out the whole bus, driver and diesel included. This is most charter, tourist, wedding and staff-transport work. Notification 11/2017-Central Tax (Rate), S. No. 10(i), covers "renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient" (wording from Notification 31/2017-CT(Rate)). You choose between:
- 5% (2.5% CGST plus 2.5% SGST). You can't take credit on goods or services, except input services in the same line of business, meaning a bus or cab you hire from another operator to cover a booking.
- 18% (9% plus 9%) with full credit. This was 12% until Notification 15/2025-CT(Rate) changed it from 22 September 2025.
The entry doesn't distinguish AC from non-AC buses. A non-AC bus hired for a trip is charged the same way.
Selling seats on an AC bus. Transport of passengers by an air-conditioned contract carriage (other than a motorcab) or an air-conditioned stage carriage is 5%, with no credit on goods or services used (S. No. 8(ii)). There's no 18% option in this entry.
Exempt trips. Notification 12/2017-CT(Rate), S. No. 15, exempts transport of passengers by a non-AC contract carriage "excluding tourism, conducted tour, charter or hire", and by a non-AC stage carriage. So a non-AC bus on a regular passenger run is exempt, but the same bus on a Tirupati package or a company picnic is a tour or a charter and is not.
Tickets sold through apps. Since 1 January 2022, when you sell bus seats through an e-commerce operator, the platform pays the GST on that ride under Section 9(5) of the CGST Act (Notification 17/2017-CT(Rate), clause (i), which Notification 17/2021-CT(Rate) extended to omnibuses). The same change took away the non-AC exemption for rides booked through such platforms (Notification 16/2021-CT(Rate)). Your invoice to the platform for its commission is a separate matter.
Comparison
GST on Bus Operator Jobs (from 22 September 2025)
| Job | GST | Entry |
|---|---|---|
| Bus hire with driver and fuel to a family, group or business | 5% limited credit, or 18% full credit | 11/2017 S. No. 10(i) |
| Same hire to a company, by a proprietor or firm billing at 5% | Company pays 5% under reverse charge | 13/2017 S. No. 15 |
| Seats on an AC bus (contract or stage carriage) | 5%, no credit | 11/2017 S. No. 8(ii) |
| Non-AC regular passenger run, not tour or charter | Exempt | 12/2017 S. No. 15(b), (c) |
| Bus given on hire to a state transport undertaking | Exempt | 12/2017 S. No. 22(a); Circular 164/20/2021 |
| Student and staff transport for a school | Exempt | 12/2017 S. No. 66(b)(i), 22(c) |
| Seats sold through a booking app | Platform pays under Section 9(5) | 17/2017 clause (i) |
Source: Notifications 11/2017, 12/2017, 13/2017 and 17/2017-Central Tax (Rate) as amended, including 31/2017, 2/2018, 29/2019, 16/2021, 17/2021 and 15/2025
RTC hire, school buses and corporate clients
Buses given to the state road transport corporation. S. No. 22(a) of Notification 12/2017-CT(Rate) exempts "giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers". Some advance rulings had read this narrowly, so CBIC Circular 164/20/2021-GST (6 October 2021) clarified that "giving on hire" includes renting. The exemption applies even when the corporation decides the routes and timings and controls how the buses run. Hire buses that operators run for TGSRTC or APSRTC under agreement fall here.
School buses. Services provided to an educational institution by way of transportation of students, faculty and staff are exempt (S. No. 66(b)(i)), but only for institutions offering pre-school education and education up to higher secondary. If you give your buses on hire to a contractor who runs the school's transport, that hire is exempt too (S. No. 22(c), inserted by Notification 2/2018-CT(Rate)). Transport for an engineering college or a university isn't covered, so bill it like any other hire.
Do you need to register at all? Bus hire is a service, so registration is compulsory once aggregate turnover crosses Rs 20 lakh in a financial year, or Rs 10 lakh in a special category State (Section 22(1), CGST Act). Aggregate turnover includes exempt supplies (Section 2(6)), so RTC and school income counts towards the limit. An operator whose only work is exempt, for example a fleet run solely for the RTC, isn't liable to register (Section 23(1)(a)).
Company clients and reverse charge. Notification 13/2017-CT(Rate), S. No. 15, as substituted by Notification 29/2019-CT(Rate), puts bus and car hire with fuel under reverse charge when three things are true: the supplier is not a body corporate, the client is a body corporate, and the supplier doesn't bill at the higher rate. CBIC Circular 130 of 31 December 2019 explains the intent: a proprietor or firm on the 5% option shouldn't charge GST to a company. The company pays it under reverse charge instead. Firms and proprietors billing at the higher rate stay on forward charge.
One wrinkle. The reverse charge entry still describes the higher rate as "central tax at the rate of 6 per cent", the old 12% option. We found no amendment updating it to 9% after 22 September 2025. If you bill a company at 18%, agree in writing that you're charging GST on the invoice, and have your CA confirm the position with the client.
A worked example. Suresh, a sole proprietor in Hyderabad, hires a 45-seater with driver and diesel to a private limited company for staff transport at Rs 2,50,000 a month.
| Option | Suresh's invoice | GST to government |
|---|---|---|
| 5% option | Rs 2,50,000, no GST charged | Company pays Rs 12,500 under reverse charge |
| 18% option | Rs 2,50,000 plus Rs 45,000 GST | Suresh pays Rs 45,000, less his credits |
Can the company claim credit on the 18% bill? Section 17(5)(b)(i) of the CGST Act blocks credit on hiring of motor vehicles "referred to in clause (a)", which means vehicles seating 13 or fewer, including the driver. A bus seats more than 13, so this block doesn't apply, though the company still has to meet the normal conditions in Section 16. Credit on travel benefits given to employees on vacation, such as leave travel, stays blocked under Section 17(5)(b)(iii).
Should you pick 5% or 18%?
It comes down to how much GST you pay on what you buy, and who your clients are.
What the 18% option lets you claim. Section 17(5)(a) blocks credit only on motor vehicles that seat 13 or fewer, including the driver. A bus isn't one of them, so on the 18% option you can claim GST on the bus itself, tyres, spares, repairs and insurance. Buses for ten or more persons (heading 8702) are 18% under Schedule II of Notification 9/2025-CT(Rate). A new bus costing Rs 40,00,000 before tax carries Rs 7,20,000 of GST. On the 18% option that's credit you set against the GST on your hire bills. On the 5% option it's a cost, because the 5% entry allows credit only on input services from the same line of business, and a bus is goods.
Diesel carries no credit either way. High speed diesel is outside GST under Section 9(2) of the CGST Act, so your largest running cost has no GST to claim on any option.
Who your clients are. Families, wedding parties and pilgrimage groups can't claim credit, so 5% is cheaper for them than 18%. Companies that can claim credit may not mind 18%, and they may prefer it to paying reverse charge themselves.
Mixing rates. If you want to bill some clients at 5% and others at 18%, talk to your CA first. Credit on the bus and spares then has to be split between the two, and the notifications don't spell out how an operator moves between options during a year.
Step-by-Step Guide
Monthly GST Routine for a Bus Hire Business
Log every trip
Keep a trip sheet per bus: date, client, route, kilometres, driver, diesel. It supports the invoice and shows which trips were exempt RTC or school work.
Tag each invoice
Mark each bill as 5%, 18%, reverse charge (company client on the 5% option) or exempt, so GSTR-1 reports each one in the right table.
Match purchase credit with GSTR-2B
On the 18% option, claim GST on the bus, tyres, spares and repairs only when the supplier's invoice appears in GSTR-2B. On the 5% option, claim only on buses or cabs hired from other operators.
File GSTR-1 and GSTR-3B
Report B2B invoices with the client's GSTIN. Show reverse charge bills without tax so the company can pay it in its own return.
Check app settlements
For seats sold through booking apps, reconcile the platform's statements. The platform pays GST on those rides, so don't pay it twice.
Source: Sections 9(2), 9(5), 16, 17(5) and 22, CGST Act; Notifications 11/2017, 12/2017 and 13/2017-Central Tax (Rate)
Our GST registration service and GST return filing service handle the setup, the option choice and the monthly returns. For how reverse charge works on the client's side, see our reverse charge guide.
What TDS will your clients deduct?
Section 194C. The definition of "work" in Section 194C expressly includes "carriage of goods or passengers by any mode of transport other than by railways". So companies, firms, trusts, societies, government bodies and larger individual businesses that hire your buses deduct TDS at 1% if you're an individual or HUF and 2% if you're a firm or company. TDS applies once a single bill crosses Rs 30,000 or the year's payments cross Rs 1 lakh (Section 194C(1) and (5), Income-tax Act 1961).
The no-TDS declaration doesn't cover buses. Section 194C(6) lets a transporter owning ten or fewer goods carriages receive payment without TDS by giving a PAN declaration. It's limited to plying, hiring or leasing goods carriages, so a passenger bus doesn't qualify.
From 1 April 2026 the rule moves to Section 393(1), Table S. No. 6(i), of the Income-tax Act 2025, with the same 1% and 2% rates and the same Rs 30,000 and Rs 1,00,000 thresholds. The Act 2025 keeps carriage of passengers in its definition of work. Our Section 194C guide covers the details.
On Suresh's staff-transport contract, a company deducting 1% on Rs 2,50,000 a month withholds Rs 2,500 a month, or Rs 30,000 a year. That credit shows in his Form 26AS only if the company files its TDS return under his PAN. Check every quarter.
How is a bus operator's income taxed for FY 2025-26?
Section 44AD is open to you. Section 44AD leaves out only the business of plying, hiring or leasing goods carriages covered by Section 44AE. Buses carry passengers, so a resident individual, HUF or partnership firm (not an LLP) can declare 6% of receipts received through banking channels and 8% of the rest as profit, if total receipts are within Rs 2 crore, or Rs 3 crore where cash receipts don't exceed 5% (Section 44AD, Income-tax Act 1961). Depreciation and running costs are treated as already allowed. If you leave 44AD within five years of using it, you can't return for the next five. From tax year 2026-27 the same rule sits in Section 58(2), Table S. No. 1, of the Income-tax Act 2025. See our Section 44AD guide.
A worked example. Suresh runs three buses. FY 2025-26 receipts are Rs 72,00,000: Rs 68,00,000 by bank transfer and UPI, Rs 4,00,000 in cash. Cash is 5.6% of receipts, so the Rs 3 crore limit doesn't apply to him, but Rs 72 lakh is well within Rs 2 crore.
| Item | Amount (Rs) |
|---|---|
| 6% of Rs 68,00,000 digital receipts | 4,08,000 |
| 8% of Rs 4,00,000 cash receipts | 32,000 |
| Deemed business income | 4,40,000 |
| Tax under the new regime (5% on Rs 40,000 above Rs 4 lakh) | 2,000 |
| Less Section 87A rebate (total income up to Rs 12 lakh) | 2,000 |
| Tax payable | Nil |
Suresh has no other income. The Rs 30,000 his corporate client deducted under 194C is sitting in Form 26AS, and with nil tax he gets it back only by filing his return. That's the most common reason a bus operator on 44AD should file every year.
When books are better. A fleet with large loan interest, a new bus or heavy repairs can earn well below 6% to 8% of receipts. To declare less than the 44AD figure when your income is above the basic exemption limit, you must keep books and get them audited under Section 44AB(e). For FY 2025-26, audited returns follow the extended dates: audit report by 21 October 2026 and return by 21 November 2026 (CBDT Circular 07/2026).
Depreciation if you keep books. Appendix I to the Income-tax Rules 1962 gives 30% on written down value for "motor buses, motor lorries and motor taxis used in a business of running them on hire". A bus put to use for less than 180 days in the year gets half the rate that year (proviso to Section 32(1)). On a bus with a book cost of Rs 40,00,000 first used in June, the FY 2025-26 claim is Rs 12,00,000. If it's first used in November, it's Rs 6,00,000. Our depreciation guide has the block-of-assets rules. If you also run goods vehicles, the truck owners' guide covers Section 44AE for them.
Common mistakes bus operators make
- Still billing 12%. The higher option has been 18% since 22 September 2025. A bill at 12% after that date leaves you paying the 6% difference yourself.
- Treating every non-AC trip as exempt. The exemption covers regular passenger runs, not tours, charters or hire. A non-AC bus on a wedding or pilgrimage trip is taxable.
- Charging GST to a company on the 5% option. If you're a proprietor or firm, the company pays that GST under reverse charge. Charging it on your invoice as well means tax is paid twice.
- Claiming bus and spare-part credit on the 5% option. Only input services from other operators are allowed. A bus, tyres and repairs aren't.
- Not filing a return when TDS is deducted. On 44AD, 1% or 2% TDS can be more than your tax. The excess comes back only through your return.
How Tax Garden helps bus operators
We register you for GST, help you choose between the 5% and 18% options for your client mix, tag RTC, school and reverse charge bills correctly, and file your monthly returns through our GST return filing service. At year end we reconcile the 194C TDS in your Form 26AS and file your return under Section 44AD or on book profit through our ITR filing service. If your fleet is growing, our accounting and bookkeeping service keeps trip sheets and books ready for audit.
