In India, buses form the mainstay of intra and intercity public transport, catering to almost 75% of total trips. However, the poor financial condition of the numerous State Road Transport Undertakings (SRTUs) providing bus-based public transport is cause for concern. With no significant improvements in bus services, commuters have little incentive to move to – or remain using – public buses, exacerbating the trend of private vehicles clogging Indian roads.

A major cause of SRTU loss-making is the extant tax framework prevailing at both the state and union level. High taxes on both inputs and revenues push SRTUs into losses, and funding for improving bus-based public transport is erratic. This paper analyses recent trends in both direct and indirect taxes on SRTUs, noting that many state SRTUs would report a state of financial autonomy in the absence of direct levies.