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GST Return Filing & Invoicing
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GST rates on rail transportThe 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.

Under Current Regime

Currently, there is service tax applicable on the transport of goods & passengers. The railways also enjoy a 70% abatement which means only 30% of the value is taxable under service tax. Thus, the effective rate is =30% of 15% = 4.5% of the total fare.

GST Rates on Rail Transport under GST

GST rates on rail transport is capped at 5%, as announced on 19th May 2017 .

Transport for PassengersGST rates on rail transport

GST will not be exceptionally beneficial to passengers who are end consumers as the effective service rate which was 4.5% will now increase to 5% in GST. In fact, ticket prices will increase slightly due to the slight increase in the tax rate. However, passengers travelling for business purposes can now claim ITC on rail ticket prices thus helping businesses to reduce their expenses.

Let us look at an example.

GST

End consumers will find that ticket prices will increase slightly under GST. However, business travellers can now claim the Rs. 50 (in the example above) as input tax credit against the output GST liability.

Transport for Goods

GST rates on rail transportThe railway sector was afraid of GST hitting freight loading in a bad way. Railway freight was lagging behind road transport in spite of railway transportation not being subject to multiple stoppages at checkpoints. Businesses have always preferred to transport goods through trucks to avoid the various compliances and paperwork involved when transporting freight via railways.

Transport of goods and passengers by rail will attract 5% tax under GST. Although it seems more than the current effective service tax of 4.5%, the effective GST liability will go down thanks to the mechanism of input tax credit which is now available on rail transport.

This will be exceptionally beneficial to the railways as there is no ITC available on transportation through Goods Transport Agencies (such as trucks). GST rate is also 5% on road transport thus making the rail freight more competitive.

No GST on Transportation of Certain Goods

Service tax is not applicable on the transport of the following goods:
(a) Relief material for disaster struck areas (food for flood victims etc.)
(b) Defence or military equipment
(c) Newspaper or magazines registered with the Registrar of Newspapers
(d) Railway equipment or materials
(e) Agricultural produce
(f) Milk, salt and food grain including flours, pulses and rice
(g) Organic manure

Registered Taxable Persons Transporting Goods via Rail

Business to Business (B2B) supplies will stand to gain with GST as input tax credit will be available.
The invoice matching concept will be applicable here as well in order to claim ITC. The IRTC will capture the GSTIN of all the business sending goods for transportation for which it will require changes to the IRTC software.

B2C Supplies- Unregistered Persons

GST will be collected by Indian Railways and deposited with the government. IRTC will maintain a consolidated summary of invoices for the freight of unregistered persons each day with details of all B2C supplies.

Summary of GST & Its Impact on Railways

GST

Conclusion

Thus, we see that GST will not benefit end consumers greatly due to non-availability of input tax credit.

However, GST will benefit the logistics sector including railways by removing the need for businesses to maintain multiple warehouses across states to avoid CST levy and state entry taxes. Transport service rate of GST at 5 per cent will be anti-inflationary and give a much-needed boost to rail freight. Reduction in cost of transportation of goods will lead to reduced prices.

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