Chapter 22

Renting of Motor Vehicle for transportation of passengers and goods


Effective date:

(1st July, 2012)

Scope of Exempt Service –

Services by way of giving on hire-

(a)  to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

(b)  to a goods transport agency, a means of transportation of goods


Meanings and Definitions:

state transport undertaking” has the meaning assigned to it in clause (42) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988)

goods” means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;


(See Notification no. 25/2012 dated 20.06.2012, effective from 01.07.2012)


Clarification by the Board

(Taxation Guide – Guidance Note – 7 – Exemptions dated 20.06.2012)

“7.11.5 Is giving of a bus on hire to any person liable to tax?

Giving on hire a bus to a state transport undertaking is exempt from service tax. If the bus is given on hire to a person other than a state transport undertaking, it will be taxed.

7.11.6 I have a bus with a contract permit and operating the bus on a route. The passengers embark or disembark from the bus at any place falling on the route and pay separate fares either for the whole or for the stages of journey. Am I required to pay tax?

No. However, transport of passengers in a contract carriage for the transportation of passengers, for tourism, conducted tour, charter or hire is taxable.”