Vendors and Railways suffering from avoidable burden of taxes

In a representation to the finance ministry, the equipment manufacturers have argued that in the absence of input tax credit (ITC) both vendors and Railways are suffering from the avoidable burden of taxes.

New Delhi: The companies engaged in manufacturing wagons and other equipment for railways are pressing for rationalisation of the GST regime by allowing an input tax credit on supplies made to Indian Railways.

In a representation to the finance ministry, the equipment manufacturers have argued that in the absence of input tax credit (ITC) both vendors and Railways are suffering from the avoidable burden of taxes.

It was pointed out that exclusion of railways rolling stock manufacturers from the scope of the refund was against the principle of the fiscal neutrality - one of the main objectives of Goods and Services Tax (GST).

The industry has suggested that the IGST rate on locomotives and rolling stock be increased to 18 per cent, which is the pre-GST rate so that the entire amount of ITC could be availed.

Alternatively, it suggested that the revenue department should remove restrictions on refund of accumulated unutilised ITC with respect to railway locomotives and rolling stock.

As per the industry, railways losing Rs 400-500 crore per month and the railway vendors too are losing an equivalent amount on account of not passing the ITC benefits. Therefore, the total loss to the railway ecosystem is more than Rs 1,000 crore per month.

Railways vendors also said that the discrimination and anomaly with respect to railways locomotives and rolling stock with respect to GST are contradictory to the policy of eliminating cascading tax effect and is also hurting 'Make in India' initiative of the government.