GST input by bus operator

Great question, Mukesh!

Here’s the GST treatment for input credit on buses used for passenger transport, especially Volvo or similar luxury buses:

Key points:

• Passenger transport service GST rate:
  As you said, GST on passenger transport service (inter-state or intra-state) is 5% (2.5% CGST + 2.5% SGST), with no ITC allowed under normal conditions.

• Section 17(5) CGST Act (Blocking of ITC):
  This section blocks input tax credit on motor vehicles and other specified goods/services if used for personal use or where GST on output is disallowed or nil-rated.

• Exception for passenger transport:
  Input tax credit on motor vehicles is allowed only if the vehicle is used for providing taxable passenger transport services charged at 5% GST (without ITC) or other taxable services like renting of motor vehicles.

• What about the bus purchase input credit?
  For buses used to provide taxable passenger transport services:

  • Input credit on the purchase of the bus (Volvo, etc.) is allowed. So, the ₹25 lakhs GST paid on purchase is eligible for ITC.

  • However, on other inputs (fuel, maintenance), ITC is not allowed because of the restriction on input services used for exempted or nil-rated supplies.

• How to interpret your question:

  • The output GST rate on passenger transport is fixed at 5% without ITC on the output side (meaning, the passenger fare is charged at 5% GST).

  • The input tax credit on bus purchase is allowed to be claimed and set off against the output GST collected from passengers.

  • However, ITC on other inputs related to bus operation (like fuel) cannot be claimed or set off.

Summary:

So, XYZ Company can claim the ₹25 lakh ITC on bus purchase and offset it against GST collected from passengers. But for other input GST (like fuel), ITC is blocked.

This is not contradictory because Section 17(5) provides a specific carve-out allowing ITC on buses used for taxable passenger transport service at 5% GST without ITC on output.