In the scenario when the industries are pressing pedals for dwindling down the GST rates to get out of the stagnant phase, rail wagon makers are urging for the contrast i.e. increment in GST rates.
According to companies, Inputs refer to GST which is levied at the rate of 5% and 18%, as a result of which large amount of, say, hundreds of crores have cemented as this forms an upturned liability format. 5% GST on railway products brings benefits for the imported rail items as the suppliers of imported railway goods have to pay small duty and this hampers the government’s goal to encourage the domestic rail wagon makers.
An executive of Bombardier said, “This has led to an inefficient tax structure and unfair advantage to a few rail suppliers including suppliers who import rolling stock,”. He further added, “This inverted duty structure followed under the GST regime is an unfair trade practice, provides non-level playing ground to rail suppliers who have single business interests in India and is completely against the agenda of government’s Make in India initiative.”
A written request regarding the elevation of GST rates on rail products from 5% to 12% has been sent by Alstom, General Electric and Bombardier, which have established manufacturing facilities for rail wagon in India, to the government.
Barricade on refunding the unutilised input tax credit (ITC) is fixed on some notified products and this includes railway goods such as rolling stock, locomotives, coaches and wagons.
“The restriction on refund of unutilised input GST credit on account of inverted duty structure has increased costs of the railway products manufacturing industry and gives a competitive disadvantage to domestic products vis-à-vis imported products, thereby adversely impacts Make in India initiative,” said Simon Garnier, India Country Finance Director chez Alstom.
Garnier told that the industry has been in constant touch with the respected authorities and is looking forward to the prompt resolution of the issue so that the local industrialists can get back to their arena ASAP. They have thumped the tub for the same before railways, Finance Ministry, State Government and GST Council. They are behesting Government for raising the GST on railway products & allowing ITC or cutting down the levy on inputs.
According to one of the industry officials who want to keep his/her name confidential, an absence of refunds which results in unutilised ITC has become an expenditure on the ground of the inverted duty structure.
Nalin Jain who is a group president of equipment business, Wabtec Corp, said, “Amplified tax structure. However, rail industry suppliers are grappling with the severe financial burden on account of inverted duty structure coupled with restrictions on refund of unutilised credit,”
