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.

ITC should not be used to pay GST on the buses’ sale until the underlying credit position is reconciled. The sale is taxable as a supply of goods, but the fact that ITC appears in the electronic credit ledger does not establish that it is eligible or available for this liability.

• For passenger transport by non-AC contract carriage, the 5% rate is generally subject to a no-ITC condition; the 12% option is generally with ITC. The stated 18% self-assessment, the rate periods used, and the basis for treating local-agent collections as tax-inclusive therefore need verification. The aggregator’s section 9(5) payment applies to aggregator-routed supplies; it does not by itself settle the treatment of direct bookings.
• ITC on the buses and related inputs may be restricted if the firm opted for the 5% no-ITC rate. Also check whether the buses were capitalised and depreciation was claimed on the GST component; credit is barred to that extent. The dates of purchase and commencement of operations do not alone determine entitlement.
• If the firm validly availed ITC under an eligible rate option, section 18(6) requires, on sale of capital goods on which ITC was taken, payment of the higher of the ITC reduced as prescribed or GST on the transaction value. A transfer-of-business or other specific fact could affect the analysis; the sale facts provided do not establish that.
• Reconcile the rate option and returns from April 2025, booking-wise tax treatment, input-credit eligibility and capital-goods records before using the ledger balance. The ticketing/invoicing position also needs review; the absence of a separate B2C invoice does not itself determine the tax liability.

This review fits naturally into the monthly GST return and asset-disposal reconciliation workflow. Manual tracking across aggregator settlements, local collections and capital assets is difficult; automation can reduce repetitive matching while professional judgment remains in control. Our platform brings together 2,000+ AI agents and 650+ integrations for GST reconciliation, return preparation and asset-sale workflows. To explore the relevant workflow, reach us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.

Yes, the balance in the electronic credit ledger can legally be used to pay GST on the sale of the buses, but only after the ITC that was never eligible has been reversed.
1. Rate option decides ITC eligibility: For passenger transport by AC contract carriage, the choice is 5% with no ITC on goods (buses, spares, consumables), or 12% with full ITC up to 21.09.2025, which became 18% with full ITC from 22.09.2025. Since tickets were issued at 5%, the department will treat 5% as the option actually adopted for those supplies.
- Under the 5% option, ITC on the buses, repairs and consumables is ineligible and must be reversed through DRC-03 with interest under Sec 50(3).
- Paying 12%/18% on a grossed-up base does not turn a 5% supply into a with-ITC supply. Grossing up the collection itself is also wrong: tax is to be computed inside the actual fare collected (Sec 15).
2. Sec 17(5)(a): ITC on buses with seating capacity above 13 (including driver) is not blocked. So the only restriction is the 5% rate condition and Sec 16(3) (no ITC on the GST part if depreciation was claimed on it).
3. Aggregator bookings: tax on these is paid by the aggregator under Sec 9(5). Exclude them from the firm's own output tax. Excess output tax paid can be claimed as a refund under Sec 54 within the time limit.
4. Sale of buses to the LLP: Under Sec 18(6) read with Rule 44(6), pay the higher of (a) the ITC taken minus 5 percentage points for each quarter or part of a quarter since purchase, and (b) tax on the transaction value at 18% (motor vehicles for 10 or more persons, from 22.09.2025). If the LLP is a related person, value the sale under Rule 28.
5. Tickets: Under Rule 54(4) a passenger ticket is deemed to be a tax invoice, so not issuing separate B2C invoices is not a default by itself.
Overall Summary: First reconcile the returns from April 2025 and reverse the ineligible ITC with interest. Then use the remaining credit to pay the Sec 18(6) liability on the sale of the buses.