GST Impact on Indian Railway Network

The Goods and Service tax has been a very much talked about topic for a long time and now the scope has to be seen towards the railway sector. It has to be studied and its cause and effect over the vast railway sector which engulfed almost all the working project sector. Indian Railways (IR) manages the railways in the nation and is controlled by the Ministry of Railways. While IR has a different budgetary designation by a method for Rail Budget, its operations are liable to certain direct/indirect assessment arrangements as far as immediate expense, excise obligation, service charge, Swachh Bharat Cess (SBC) and so on.

IR works through zones, divisions and a large portion of public area endeavours, other than different plans of action/extends under PPP/JVs. Significant income wellsprings of IR incorporate cargo, traveller admission, promotion, and publicity, arrive rent, different leases and so on. Looking for the development, modernization, and support of railways, IR is in critical need of assets or plans whereby IR can raise subsidies proficiently with ease to meet its here-and-now/long haul budgetary prerequisites.

47th GST Council Meeting Updates for Railway

• The GST rate is increased on works contract services for roads, bridges, railways, metro, effluent treatment plants, crematoriums etc. from 12% to 18%.
• The exemption is withdrawn on transportation by rail or a vessel of railway equipment and material.

Latest Update

• 9th February 2023: The Karnataka AAR has ruled that Indian Railways contractors are subject to 18% GST for work under the bridge. Read order
• 03rd January 2023: The Uttar Pradesh Authority of Advance Ruling issued an order for the M/S The India Thermit Corporation Limited. In the rule said, that 12% GST does not apply to supplies to Indian railways during construction and after completion of the project. Read more
• 1st August 2022: AAAR (Appellate Authority for Advance Ruling) of Delhi state including centre member Smt. Mallika Arya and member state Shri Ankur Garg have judged that the rate of GST for food and supplies must to use in IRCTC. Read order
• 21st July 2022: AAR for Uttar Pradesh has issued an order that services provided to RVNL will not come under the GST works contract, presided over by Abhishek Chauhan (Central Tax) and Vivek Arya (State Tax). Read Order
• Uttar Pradesh GST AAAR has issued an order for the M/S Prag Polymers. The order said there is a 12% GST rate payable to manufacturers and suppliers of Indian railway locomotive parts and coaches. Read Order
• The Telangana AAR has ordered that an 18% GST rate is applicable on supply, testing, design, commissioning and installation of TCAS in locomotives. Read Order
• Due to the Covid-19 overbreak, the Indian railway has increased the charges on platform tickets to INR 50. Recently, the railway department has reduced the 400% price of platform tickets. Now, the passenger will have to pay only INR 10 in several places such as LTT, Thane, Kalyan, Panvel and CSMT.

Read Also:  Overview of Different Types of Taxes in India

Taking after issues require thought from backhanded assessments see point under the GST administration

• Rapid Diesel (HSD)/Light Diesel Oil (LDO) devoured by Indian Railway might be considered as a contribution to the end goal of Cenvat Credit.
• Railroad locos/coaches being utilized as a part of the house (captive utilization) might be exempted from Excise Duty/GST.
• Present Chapter 86 of CETA, 1985 relating to Overhead electric wires and other related types of gear might be secured under the meaning of Capital Goods for permitting Cenvat Credit.
• All undertakings being executed by Indian Railways through PPP/JV might be exempted from collect of proposed GST and so on to give a lift to Rail Infrastructure Development and additionally to lift Indian economy.
• Long haul leases implied for improvement of foundation ought to be considered as an exchange of benefit.
• Cleaning at Railways Stations, Railways tracks and so on might be incorporated into Sanitation Conservancy and saved from requiring of GST in national intrigue and remembering SBC activities.
• Indian Railways might be absolved from an installment of GST under turn around charge system/TDS arrangement.
• The dread of the Railways being scammed in the GST administration comes when the legislature has been focusing on bringing Railways’ share up in transport to 45% by 2030 from around 33% at this point.

The interaction of GST combined with proceeded with slackness sought after for product development has raised the question of assembling units of Railways enduring huge installation without moving limit, constraining it to investigate trade openings in a troublesome worldwide condition. Harsh Dhingra of Bombardier Transportation mentioned some of the important points over this issue, “India has been growing around 7-8% every year and for India it to maintain these levels, railways can grow every year by around 9.5% with the impetus of GST, Rail transportation will then create new jobs, save energy, improve the environment, while moving people, raw material and goods more efficiently nationwide, GST in India is a welcome sign for the industries. GST is a significant move and one of the most important ones post liberalization in India, but the implementation is the key.”

Trains in India are very much affected by the new rules and regulations being imposed on it. The former railway minister Suresh Prabhu also admits that the change has begun and it will still be on of the most preferred mode of transportation for the country. Asking about the facilities in the railways the ministers said that We are trying to do our best by enhancing passenger facilities like introducing high-speed trains Gatimaan and Tejas, elevators, better waiting rooms, clean my coach service, etc.

The transportation from the railways will also become expensive once GST rolls out as from the normal wagon transportation a rate of 5 percent GST will be levied while on the container transportation there will be 12 percent GST. Currently, there is 6 percent service tax on the transportation. Although, it cannot be said that the new tax rate is just double from the previous but it will totally depend on how much the new tax is from older tax scheme.

While talking about the fiscal scenario of the Indian railways the minister said that, We have prepared a road-map for railways finances, on the revenue side we are launching new products like Tejas, Gatimaan that will give us revenue, we are reducing the cost of operations by getting Rs.41,000 crore as savings on energy in next 10 years. we are doing non-fare revenue that could fetch us Rs.40,000 crore in next 10 years. And, we will have savings through enterprise resource planning for which consultations are already on.

Suppliers of Railways Under Problem

The GST also have taken the suppliers of railways into its ambit and created certain issues forcing them to go non-operational. Most of the units are related to the fabrication work and are based in Punjab, Haryana and Chandigarh. A total of 175 small units beard an approx 455 crore loss while almost 1 to 2 lakh small units are in a struggle to get through the compliance of GST.

The nation famous coach factory of Kapurthala which is known to be producing at least 6 coaches per day is also going through tough times and hardly managing few coaches at the time of several months. The suppliers who have filled out the forms for the tender and have to supply the products and parts within the specified period of time are going through tough issues of GST.

The impact of GST on railways and suppliers has gone to such an extent that almost 75 percent firms have partially or completely stopped the supplies due to losses. The reason behind this menace is that before GST was applicable, railways suppliers had to pay 12 percent excise duty on raw materials and 6 percent VAT and after that, the railways provided them 12 percent refund. But now after the implementation of GST, the suppliers had to pay 18 percent GST on raw material while the refund is lesser than 7 percent overall. This issue has made an overall negative effect on the whole supply chain of railways.

After all this, the tender supply duration is one year which mandates the suppliers to supply the items within the time period and the steel rates are hiked on an average 12 to 15 percent from earlier.

GST Decrease From 18 To 5 Percent Made Cheaper Food In Railway

The GST rate has been reduced to 5 percent from 18 percent on the food items on both platforms and inside the trains by the central government. The impact of the reduction of GST in Railways will also be seen on Railway Catering and Catering licenses. This will provide food items at affordable rates to the passengers.

Ferozpur Divisional Railway DRM Vivek Kumar and DCM Rajneesh Shrivastava said that the GST rate has now reduced to five percent in the Railway Catering system so that the food items in the station premises and inside the trains will be cheaper than before.

Srivastava said that a letter has been received by the head office to reduce the GST rate in catering, which has been sent to all the concerned people.

Passenger Angrez Singh Bhullar and Amandeep Kaur said that the reduction in GST rates on railway catering will be given directly to the passengers, and the move is welcomed by the people, although in July when the GST tax was levied at 18 percent in Railway Catering, it was opposed by all. The Prime Minister and the Finance Minister had demanded to keep the railway catering outside the GST scope, which has finally been amended, and the initiative is appreciated by the people.

Asking about the GST impact over the railways, he said that look at it as a major opportunity because the global market will be created through it. Interstate transfers will increase because of GST. Roads will have an advantage on short distance while railways have the advantage on long distances.

Shatabdi-Rajdhani Still Charging Higher 18% GST On Railway Food

All the food available at the railway station is entitled to attract 5% GST, whereas the catering food available on trains are liable to charge 18% GST. In Shatabdi-Rajdhani, they charge 18% GST on the ticket itself. However, previously the GST on stations was 12% which has been reduced to 5%. Railway board has issued Circular no. 44-2017 on 29 June 2017 according to which 18% GST will be applicable. It is also mentioned to charge GST with a ticket of Shatabdi-Rajdhani and Duronto Express. Service provider caterer will be able to take back this. The same is applicable to Pantry Car where the payment is made in cash.

GST Applicable on Station Parking Charges

Indian Railways has now applied GST in parking lots for two-wheelers and four-wheelers on railway stations throughout the country. It would influence the pockets of passengers in crore of rupees daily. After the implementation of GST, the parking contractor would now charge Rs 6 for two-wheelers for first five hours which includes Rs 5 parking and Rs 1 as GST, similarly, Rs 12 for four- wheelers. Currently, Rs 5 for two-wheelers and Rs 10 four-wheelers are being charged by the parking contractor. Approximately, more than 8000 railway stations are spread across the country where people park their vehicles.

Indian Railways instructed to inform all the parking contractors of railway stations to provide new parking slip. Once the new slip gets printed, the new rates of parking will come into effect since that day.