GST Impact on Indian Railway Network

The Goods and Services tax has been a 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 encompasses almost all the working project sectors.

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 duty, 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, modernisation, and support of railways, IR is in critical need of assets or plans whereby IR can raise subsidies proficiently with ease to meet its current/long-term budgetary requirements.

56th GST Council Meeting Update for the Indian Railway Network

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

• Rapid Diesel (HSD)/Light Diesel Oil (LDO) consumed by the Indian Railway might be considered as a contribution to the end goal of Cenvat Credit.
• Railroad locos/coaches being utilised as a part of the house (captive utilisation) 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 the collection of proposed GST and so on to give a lift to Rail Infrastructure Development, and additionally to lift the Indian economy.
• Long-haul leases implied for the improvement of the 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 GST in national intrigue and remembering SBC activities.
• Indian Railways might be absolved from an instalment of GST under the turnaround charge system/TDS arrangement.
• The dread of the Railways being scammed in the GST administration comes when the legislature has been focusing on increasing Railways’ share in transport to 45% by 2030 from around 33% at present.

Read Also:  Overview of Different Types of Taxes in India

The interaction of GST combined 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 opportunities 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 liberalisation in India, but the implementation is the key.”

Trains in India are very much affected by the new rules and regulations being imposed on them. The former railway minister Suresh Prabhu also admits that the change has begun, and it will still be one of the most preferred modes 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.

From 22nd September 2025, wagon/container transport by any individual other than Indian Railways will draw 5% GST without ITC, replacing the earlier 12% with the ITC rate. Currently, there is a 6 per cent service tax on transportation.

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, and we are reducing the cost of operations by getting Rs 41,000 crore as savings on energy in the next 10 years.

We are doing non-fare revenue that could fetch us Rs 40,000 crore in the 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 has also 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 bear 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 is hardly managing to produce a 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% firms have partially or completely stopped the supplies due to losses. The reason behind this menace is that before GST was applicable, railway suppliers had to pay 12% excise duty on raw materials and 6 per cent VAT and after that, the railways provided them a 12 per cent refund.

But now, after the implementation of GST, the suppliers have to pay 18 per cent GST on raw material, while the refund is less than 7 per cent overall. This issue has had an overall negative effect on the whole supply chain of railways.

GST Decrease from 18 to 5% Made Food Cheaper on the Railway

The GST rate has been reduced to 5 per cent from 18 per cent on 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 been reduced to five per cent 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.

Passengers 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 per cent in Railway Catering, it was opposed by all. The Prime Minister and the Finance Minister had demanded to keep the railway catering be kept outside the GST scope, which has finally been amended, and the initiative is appreciated by the people.

Asking about the GST impact on the railways, he said that it looks 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 distances, 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 is 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%.

The 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 on a ticket of the Shatabdi-Rajdhani and Duronto Express. The service provider caterer will be able to take this back. 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 at railway stations throughout the country. It would influence the pockets of passengers in crores of rupees daily.

After the implementation of GST, the parking contractor would now charge Rs 6 for two-wheelers for the 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 for 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 at railway stations to provide a new parking slip. Once the new slip gets printed, the new rates of parking will come into effect from that day.