A committee has proposed replacing the existing three-tier tax structure for contract carriage buses in Telangana with a uniform tax of ₹1,510 per seat per quarter for State-wide permits. There are 8,394 contract carriages in the State.
The recommendations allow for all permit holders to enjoy them till a notification of the new system comes into effect. While the One District Permit holders would have to pay ₹390 more per seat, per quarter, once they move to a State Permit, Two District Permit holders would have to pay the same, but will stand to benefit as they will be able to ply their contract carriages across the State. State Permit holders will have to pay a significantly lesser amount.
Existing permit-wise tax rates
The report on ‘Rationalisation of Tax on Contract Carriage Buses Plying within Telangana’, submitted by Transport Commissioner K Ilambarithi, recommended replacing the existing permit-wise tax rates of ₹1,120 for One District Permits, ₹1,510 for Two District Permits and ₹3,285 for State Permits with a uniform rate. The proposal covers contract carriages permitted to carry more than 12 persons, excluding the driver. The committee studied and compared tax slabs of various states including Kerala, Karnataka, Maharashtra and Odisha before concluding that the recommended tax slab is “moderate” in nature.
Backdrop of the proposal
The proposal comes against the backdrop of several factors, including the reorganisation of districts in October 2016, which increased their number to 33. The report notes that the average area of a district has reduced to less than one-third of what it was earlier. In other words, average district area saw a reduction from approximately 11,200 square km to around 3,400 square km. As a natural consequence, contract carriages that could previously operate across larger districts now require temporary permits (TPs) to travel to neighbouring districts for routine operations. Operators would have to apply for TPs to travel from the Medchal-Malkajgiri district to the Rajiv Gandhi International Airport which is in Ranga Reddy district.
Misuse
The number of temporary permits issued to contract carriages rose from 26,510 in 2021-22 to 84,418 in 2025-26, an increase of about 218%, the report observed. It also flagged the alleged misuse of temporary permits by operators. According to the committee, some One District Permit holders have been repeatedly obtaining TPs to operate across districts for much of the year, thereby paying less than the tax applicable to State Permit holders.
Over 84,000 TPs were issued to around 5,000 vehicles in 2025-26 alone. Of these more than 2,900 vehicles applied for and obtained 12 or more TPs each. According to the report, this accounts for 74,391 permits, which translates into 88% of the total TPs. Of these 2,923 vehicles, 2,722 vehicles are One District Permit holders. “On an average, each such vehicle remained covered by a TP for about 258 days in a year. One vehicle obtained as many as 103 TPs in a single year,” the report states. This means that said vehicle obtained a new TP every three or four days.
Pointing to a potential loss of revenue, the committee report explained that the One District Permit holding 2,722 vehicles paid ₹3.51 crore as TP fee for 70,237 TPs. Had they been covered by State Permits, they would have paid ₹82.58 crore per annum.
“It is evident that the Temporary Permit, intended for occasional and temporary needs, is being used as a regular and low-cost substitute for a Two District or State Permit, contrary to the object of Section 87 of the Act,” an excerpt reads.
Interestingly, Ranga Reddy, Medchal-Malkajgiri, Hyderabad and Sangareddy districts combined have 5,008 One District Permit vehicles, 1,623 Two District Permit holding vehicles, and only six State Permit holding vehicles. These four districts saw as many as 57,984 TPs being issued. The revenue generated by means of tax in 2025-26 is ₹ 92.79 crore which is a 79.4% share in tax.
Touching upon the merits of the recommended change in system, the committee stated that this would bring about an alignment of tax structure vis-a-vis reorganised districts, curb TP misuse, make administration simpler, facilitate State-wide connectivity and boost tourism, strengthen Telangana as a transport hub, generate local emplyment and bring about road safety.
Mr. Ilambarithi submitted the recommendations to Special Chief Secretary of Transport, Roads and Buildings Department Vikas Raj.
