The committee recommends replacing Telangana’s three-tier tax slab for contract carriage with a single tax system

The commission proposed to replace the existing three-tier tax structure for contract transport buses in Telangana with a uniform tax of ₹1,510 per seat per quarter for statewide permits. There are 8,394 contract carriers in the state.

The recommendations allow all permit holders to use them until the notification of the new system comes into force. While single-district permit holders would have to pay ₹390 more per seat per quarter once they switch to a state permit, dual-district permit holders would have to pay the same but will benefit as they will be able to ply their contract carriages across the state. Holders of a state permit will have to pay a significantly lower amount.

Existing tax rates allowed

The report on “Rationalization of Bus Tax for Contract Passenger Transport in Telangana”, submitted by Transport Commissioner K Ilambarithi, recommended replacing the existing tax rates of ₹1,120 for a single-district permit, ₹1,510 for a two-district permit and ₹3,285 for a state permit with a uniform rate. The proposal applies to contractual transports that can transport more than 12 people, excluding the driver. The Commission studied and compared the tax rates of various states including Kerala, Karnataka, Maharashtra and Odisha before concluding that the recommended tax scale is “moderate” in nature.

Design background

The proposal comes on the back of several factors, including a reorganization of districts in October 2016 that increased the number to 33. The report says the average district area has shrunk to less than one-third of what it was before. In other words, the average district area has shrunk from about 11,200 km2 to about 3,400 km2. A natural consequence is that contract carriers that could previously operate in larger districts now require Temporary Permits (TPs) to travel to neighboring districts for routine operations. Operators would have to apply for TP to travel from Medchal-Malkajgiri district to Rajiv Gandhi International Airport located in Ranga Reddy district.

Misuse

The number of temporary permits issued for contract shipping increased from 26,510 in 2021-22 to 84,418 in 2025-26, an increase of around 218%, the report said. He also drew attention to the alleged misuse of temporary permits by operators. According to the committee, some single county permit holders repeatedly obtained TPs to operate across counties for most of the year, paying less than the tax applicable to state permit holders.

In 2025-2026 alone, more than 84,000 TPs were issued for around 5,000 vehicles. Of these, more than 2,900 vehicles applied for and received 12 or more TPs each. According to the report, this represents 74,391 permits, representing 88% of the total number of TPs. Of these 2,923 vehicles, 2,722 vehicles hold a single district permit. “Each such vehicle remained covered by TP for an average of about 258 days in a year. One vehicle received as many as 103 TPs in a single year,” the report said. This means that said vehicle received a new TP every three or four days.

Pointing out the potential loss of revenue, the committee’s report explained that one district permit, which has 2,722 vehicles, paid ₹3.51 crore as TP fee for 70,237 TPs. If they were subject to state permits, they would be paying ₹82.58 crore per year.

“It is evident that the Temporary permit, intended for occasional and temporary needs, is used as a common and cheap substitute for a two-district or state permit, contrary to the purpose of Section 87 of the Act,” the excerpt reads.

Interestingly, Ranga Reddy, Medchal-Malkajgiri, Hyderabad and Sangareddy districts together have 5,008 vehicles with single-district permits, 1,623 vehicles with two-district permits and only six vehicles with state permits. As many as 57,984 TPs were issued in these four districts. The revenue generated through taxes in 2025-26 is ₹ 92.79 crore, which is 79.4% tax share.

Considering the merits of the recommended change in the system, the committee noted that it would bring alignment of tax structure with reorganized districts, curb misuse of TP, simplify administration, facilitate nationwide connectivity and promote tourism, strengthen Telangana as a transport hub, create local employment and bring road safety.

Mr Ilambarithi submitted the recommendation to the Special Chief Secretary of the Department of Transport, Roads and Buildings Vikasi Raj.

Published – 13 Oct 2026 15:09 IST