In a bid to circumvent potential Goods and Services Tax (GST) implications on payments made to its dedicated freight track network, the Dedicated Freight Corridors (DFC), Indian Railways is actively exploring alternative approaches, as reported by Economic Times. Tax authorities have signalled the imposition of an 18% GST on remittances from Indian Railways to the extensive Rs 1.24 lakh crore DFC, intended for utilization.
These payments primarily assume the form of a track access charge (TAC), currently exceeding an annual sum of Rs 7,000 crore. It is foreseen that this figure will escalate with the entire 2843-km DFC network anticipated to become operational in the upcoming fiscal year.
Typically, financial transactions between distinct government entities enjoy exemption from the purview of GST. However, the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) is registered as a special purpose vehicle (SPV) under Indian Railways, affording it the status of an autonomous entity delivering track services.
For administrative classification, DFCCIL is categorized as a Zonal Railway. This signifies that any revenue generated through the transportation of goods or passengers is accounted for under the umbrella of the Indian Railways. Subsequently, the Railways dispenses finances based on the necessities of specific zones under various allocations, with TAC being one of the crucial heads that now confronts potential GST implications.
To address this predicament, an official well-versed with the situation revealed that the accounting classification might be modified to ameliorate the ramifications of the tax liability.
It is imperative to acknowledge that the funds disbursed by Indian Railways constitute the solitary source of revenue for DFCCIL, a necessity to repay debts acquired from multilateral institutions. Notably, the World Bank and Japan International Cooperation Agency (JICA) together are creditors to the extent of over Rs 52,000 crore, designated for the development of the freight corridors.
The Dedicated Freight Corridors (DFCs) are perceived as a transformative initiative by Indian Railways, aiming to augment the modal share of railways in the broader context of freight transportation across the nation.
