The Indian Railways is the 4th largest railway network and the 8th largest employer in the world. Thousands use the railways to travel every day; whether for short commutes to work or longer journeys between cities – since the time the first tracks were laid by the British connecting Bombay to Thane. In 2015-16, the Indian Railways carried more than 22 million passengers per day and 1.101 billion tonnes of freight annually.
Indian Railways has asked the Goods and Services Tax (GST) Council to treat it as a unified entity under the new indirect tax regime, so that it needs only a single registration. It also wants internal supplies to be exempted from taxes.
GST law shall extends to the whole of India and SGST law would apply to respective states. Presently, Service Tax law extends to the whole of India except the State of Jammu & Kashmir and Central Excise law extends to the whole of India.
A tax invoice shall include a ticket for the supply of services. Suitable changes need to be made in respect of discount/concession given to specified categories of persons and goods transportation so that such relief shall not become part of the transaction value for the purpose of GST. However, in the case of free pass cards, invoice of the same to be prepared by showing 100% discount from normal fares. It may be noted that the ticket should contain prescribed information such as:
- name, address and GSTIN of the supplier.
- date of its issue.
- name, address, and GSTIN/ Unique ID Number, if registered, of the recipient etc.
Indian Railway my take up the issue of considering tickets as invoice with exception of certain information which may not be captured in tickets. Further, scope for consolidated daily invoice may also be explored for matching purposes.
Currently, under service tax, Indian Railway has been paying service tax on the abated value of services. Abatement at a glance is as follows:
- Transport of goods by Rail: 30% (i.e., tax to be levied on percentage of taxable value)
- Transport of passengers by Rail: 40% (i.e., tax to be levied on percentage of taxable value).
Under GST law, GST Council has proposed four-tier rate structures, i.e., 5%, 12%, 18% and 28%. However, no abatements have been prescribed yet. Therefore, prima facie, it appears that Indian Railway would need to pay GST at the rate as may be prescribed for the transportation of goods and/or services. Further, it is estimated that if no abatement is given or exemptions allowed to the Indian Railway, then GST payable by IR may be around Rs. 20,000/- crores(@18%).
The national carrier has requested that material for its own use and repair of coaches and locomotives be considered a centralised activity eligible for IGST waiver. “There is no value added when the railways is transferring material for its own use, but going by the technicality of the Act, there is interstate movement,” said an official. Unlike integrated GST levied on other products that are bought by consumers, movement of wagons for repair, for example, would attract interstate tax,but will still be used by railways. This would mean that the IGST paid will not be utilised (for paying ouput tax) through further sale. The railways has been told by the finance ministry that it will consider such movement as interstate transaction initiallyand might review the matter at a later stage after the GSTrollout.
Indian Railway is required to get registration in the State from where it makes the supply. There is no concept of Centralized registration under GST as it is available under the present service tax. Therefore, State wise registrations need to be taken.
Under the GST, the rate of tax on the transport sector would be 5 per cent. As of now, the railways will have to register each of its 17 zones or 73 divisions in all the states. They would also have to pay the integrated goods and services tax for moving its own products — coaches, tracks — for internal consumption from one state to another.
Non-air conditioned (AC) trains, including local and metro, were exempted from the GST. Those travelling in AC would have to cough up 5 per cent, up from the current 4.5 per cent.
Yatri Ticket Suvidha Kendra have been appointed or set up by the IR for the facilitation of issuing tickets and rendition of other services. These services will be covered under the scope of GST. Provisions of GST will apply accordingly.
According to model GST law, supply also includes cleaning/sanitation services and no exemptions are proposed so far. Therefore, these services would be subject to GST.
Warehousing facilities provided by the Railways to Food Corporation of India (F.C.I) etc. may be taxable under GST.
Maintenance charges collected from the National Highway Authorities of India (NHAI) or State Government for maintenance of the road and under/over bridges by Railways be subject to GST. However, no exemptions have provided yet.
Amount charged in the name of interest on the capital cost of sidings by Railways from private parties will liable to GST. Annual Maintenance Contracts (AMC) entered by Railways for its equipment maintenance i.e. computer, machinery etc. will liable to GST. Maintenance charges collected by Railways from private parties to maintain their private sidings will liable to GST.
Separately, the railways will also be burdened with uploading data of each ticket sold on the GST network as the originating and terminating places of travels could be interstate. “A ticket could be bought in Delhi but the end point could be anywhere. Now each ticket is an invoice and we will need to upload data of each ticket, “said the official. The railways sells around 20 lakh tickets for the air-conditioned categories alone. Till now, such tickets sales were showed in an aggregate basis and no details were required.