The tax authorities have indicated 18 per cent GST on remittances made by the railways to the 1.24 lakh crore dedicated freight corridors (DFC)
The Indian Railways are looking into options to get around a potential GST levy on payments they make to its exclusive freight track network. The tax authorities have indicated 18 per cent GST on remittances made by the railways to the 1.24 lakh crore dedicated freight corridors (DFC) for use, according to officials informed of the proceedings.
This compensation comes in the form of a track access charge (TAC), which currently exceeds 7,000 crore each year. This is anticipated to increase once the entire 2843 kilometer DFC network is operational the next fiscal year, according to a report by Economic Times.
The transfer of funds from one branch of the government to another would not be subject to the GST under normal circumstances. However, the Indian Railways have registered the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) as a special purpose vehicle (SPV). It now has the authority to operate independently and provide its tracks as a service.
The DFCCIL is a Zonal Railway, however, for administrative purposes. As a result, all profits made from transporting products or people will be credited to the Railway account.
The Railways then distributes money under numerous headings in accordance with a zone's needs. One of these heads that may soon be subject to a GST levy is TAC.
The only source of income for DFCCIL, which must repay the debt it borrowed from multilateral organizations, is the reimbursements given by the Railways. More than 52,000 crore must be recovered from the freight routes by the World Bank and the Japan International Cooperation Agency (JICA) alone.