HYDERABAD: The Telangana State Road Transport Corporation, which has an ambitious plan to buy 1,200 new buses, is in a fix now with bus body fabrication cost going up steeply. Bus body parts are beings taxed at 18 per cent for service and at 28 per cent for the material under the Goods and Service Tax regime. The higher cost of building bus body is, thus, expected to foil the corporation’s plan.
Bus fabrication is done mostly by small-scale industries that were only taxed 5 per cent Value Added Tax (VAT) with no excise duty. But under GST, the TSRTC has to decide what tax slab bus body fabrication will come under. Bus body parts attract a 28 per cent GST but its fabrication work would be considered a service and comes under an 18 per cent GST slab. RTC runs three fabrication units in the city.
“I don’t see much increase in the cost of spare parts,” said Swarna Shankaran, chief finance manager of TSRTC. “Bus body fabrication costs have gone up. There is a possibility that it will be 28 per cent. We have applied for 18 per cent slab, 13 per cent hike from the 5 per cent VAT we had earlier. We find it difficult to set off,” she added.With the input tax credit (ITC), the corporation can reduce the cost of bus body fabrication to 5 or 6 per cent.
AC buses attract 5 per cent GST but RTC cant claim ITC for it. The state government undertaking believes that if it is allowed to claim ITC for the 5 per cent GST on AC buses, the losses due to GST on bus body fabrication can be negated. “After all, they have given ITC to the railways and airlines. The same should be extended to state transport units too,” Swarna Shankaran said.
Impact of metro
The added costs on account of GST come at a time when Hyderabad metro Rail is all set to operate trains on RTC’s major revenue-generating route, Miyapur-Nagole, on which it opertes 1,690 buses daily.
“We will study the impact of metro rail on bus travel and RTC revenue for two months before drawing up a new strategy,” said A Purushotham, executive director of TSRTC’s Greater Hyderabad zone.
RTC hopes the possibility of higher cost of metro rail tickets will make commuters opt for buses. “RTC charges 80 paise per kilometre whereas the metro fare will not be less than `5 per kilometre. The cost difference may narrow down on long-distance travel but for short distances bus travel will be cheaper for the commuter,” he explained.
Earlier this month TSRTC announced the plan to buy 1,200 new buses at a cost of `140 crore, of which `34 crore has been released. The corporation is on the look-out for funding from commercial banks through Marginal Cost of Funds-based Lending Rate (MCLR), where banks fix the lending rates based on the risks involved. Much to the corporation’s dismay, not many banks have come forward so far to lend to TSRTC.
“We may not get the loan as we are in losses and have no government guarantee,” said the chief finance manager.