ITC availed on 5%-rate passenger transport (AC buses)

This needs untangling before the ITC question can be answered, because the two GST options for AC contract carriage cannot be blended.

Option A: 5% on fares, with no ITC on the buses, fuel or repairs (ITC only on input services in the same line, such as a subcontracted leg). Option B: 12%, which became 18% from 22 September 2025, with full ITC. The operator picks one and sticks with it.

From your facts the firm collected 5% from passengers, which is the Option A rate. If that was the operative option, the ITC on the bus purchase and on repairs was never eligible, and the grossing-up to pay 12% or 18% was an overpayment, not a cure. If Option B was intended, charging only 5% on tickets was an undercharge and the grossing-up may have discharged the output liability - in which case the ITC stands. The returns, not the tickets, will tell you which position was actually adopted.

Two more wrinkles. Aggregator-routed bookings have been a Section 9(5) service since 1 January 2022 - the aggregator pays the GST on those rides, so the firm paying output tax on those collections again was a double payment. And a sale to an LLP is likely a related-party transaction, so Rule 28 valuation applies if the price is below open market value.

Direct answer: the electronic credit ledger can mechanically pay the 18% output tax on the sale of the buses. But settle the option question first. If the ITC was ineligible, using it now converts a reversal-plus-interest issue into a demand with penalty. Reconcile the returns against the tickets, reverse what was wrongly availed, and only then net the balance against the bus sale. This file genuinely needs a CA sitting with the ledgers.

Yes, the available ITC can be utilised against the GST payable on the sale of the buses, subject to the provisions of Section 18(6) and Rule 44(6). The eligible amount should be calculated as per the prescribed formula before utilisation.