1. Railways to get edge post GST, fear fleet owners

Railways to get edge post GST, fear fleet owners

Transporting goods via rail may be a cheaper option than ferrying them by road, post the rollout of the goods and services tax (GST).

By: | New Delhi | Published: June 22, 2017 5:44 AM
indian railways, Transporting goods via rail, gst rollout, GST rates, gst prices Transporting goods via rail may be a cheaper option than ferrying them by road, post the rollout of the goods and services tax (GST).(Reuters)

Transporting goods via rail may be a cheaper option than ferrying them by road, post the rollout of the goods and services tax (GST). This is because the railways can claim input tax credit on the 5% GST applicable on the service provided, while fleet owners cannot. According to fleet owners, post roll-out of GST, customers may prefer to transport goods by the railways since it will work out cheaper compared with roadways. Input tax credit that the Indian Railways will claim on the 5% GST applicable on its services will be eventually passed on to the customers. Fleet owners on the other hand will not be able to claim any input tax credit as diesel — one of the main input costs — has been kept outside the purview of the new tax law. The raw materials that are needed by fleet owners to provide services to their customers have not been considered by the GST Council; presentations have been made by the transport associations to the officials of both finance and road transport ministry in this regard. Transport minister Nitin Gadkari has called a meeting with all the stakeholders of the transport and automobile industry on June 23. “A fleet owner’s input cost is the investment in the vehicles, insurance cost of the driver, maintenance of the infrastructure in central and regional offices and diesel for which we cannot claim an input tax credit. This will increase our cost and make us uncompetitive against railways,” said All India Motor Transport Congress (AIMTC) president Navin Mehta.

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The transporters also want the implementation of GST to be deferred by two months so that it also includes the e-way Bill, which will remove the purpose of keeping checkposts at state borders. “The Union government wanted to sell GST by saying that it will remove the checkposts at the state borders and make movement of goods seamless. Without the implementation of the e-way Bill, checkposts will continue and fleet owners will continue to face the existing issues,” said SP Singh, senior fellow, Indian Foundation for Transport Research and Training (IFTRT). “There is a bit of discrimination between railways and trucks under GST but it’s unlikely to have any significant affect on the business for trucks. Even today, transporting goods by railways is cheaper compared with trucks but the latter corners the bulk of the goods transport business because of greater efficiency, whereas the railways suffers from issues like congestion and unreliability,” said Vishwas Udgirkar, partner, Deloitte. As of now, almost 36% of the total freight gets transported by railways and around 55% gets transported by roadways, since fleet owners give point-to-point service, which is more convenient for customers.

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