Skip to main content

GST breather for Railways; no tax on transfer of goods for self-consumption

GST breather for Railways; no tax on transfer of goods for self-consumption
No exemption would be available if the transaction is classified as a good
In a welcome break for the Indian Railways, no goods and services tax (GST) will be applicable on inter- or intra-state transfer of equipment/materials (without transfer of title) for self-consumption. This is a major relief for the railways, with annual internal consumption estimated to be about Rs 20,000 crore.
In a notification to field units on July 11, the railways said, “Transfer of goods/stores from one state/Union Territory (UT) to another state/UT is considered to be an exempted activity.” The notification cited section 7 (1) of the CGST Act 2017, along with clause 1(b) the Schedule II of the CGST Act, 2017 for the said exemption.
Experts corroborated this, claiming that according to the GST Act, transfer of goods by any government — Centre or state — or local authority to a similar government unit, is exempt from the indirect tax.
“Transfer of such equipment (without transfer of title) qualifies as a service as per the CGST Act,” said Saloni Roy, senior director, Deloitte Haskins & Sells. 
But here’s the catch: GST experts said the railways claiming transfer of goods as a service could lead to disputes. 
“The supply transaction between two interstate branches may not necessarily be accepted as a transfer of right in goods (defined as ‘service’), and more likely to be treated as the transfer of goods,” said Sachin Menon, partner and head, indirect tax at KPMG in India. 
No exemption would be available if the transaction is classified as a good.
Roy, however, added such exemption has been provided specifically to services between government agencies. If the claim of the railways is accepted, then the inter-state transfer of all goods for self-consumption will be exempted in the case of supply between governments and local bodies, noted experts. 
In June this year, the Ministry of Railways had pitched with Ministry of Finance and the GST Council that the transporter should be considered as a unified entity for purpose of the indirect tax, as it will have to register each of its 17 zones or 73 divisions in all the states under the new regime. It seems this request by the railways has not been accepted.
R Sivadasan, the former financial commissioner of railways, pointed out despite its complex structure of several zones and division, Railways has adapted itself well to the GST regime.
“The exemption is going to be a huge boost for the railways,” he added. 
Earlier this year, the railways appointed law firm Lakshmikumaran & Sridharan to advise it on GST implementation.
The Business Standard, New Delhi, 09th August 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…