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Impact of GST on Various Segments of Indian Railways

Ministry of Railways successfully embraced GST on 1st July, 2017. The Indian Railway is the national carrier and undertakes billions of transactions annually for transportation of passengers and goods. Therefore, it required a mammoth exercise to modify the ERP system of Indian Railways (IR) for issue of Passenger Tickets and Freight Invoices to capture GST related details. Similar exercise was taken for non-computerised services like way leave charges, parcels etc. Thus, it started issuing GST compliant Railway tickets and invoices right on time from 1st July 2017.

The government made a conscious effort to minimise the burden on railway passengers. GST is restricted to 5% (in place of service tax of 4.5% levied earlier i.e. an increase of only 0.5%) for passengers travelling by rail only in First class and air-conditioned coaches. Similarly, GST on Transport of goods is 5% (in place of service tax of 4.5% levied earlier i.e. an increase of only 0.5%) with exemption for essential goods like milk and agriculture produce.

Given the public utility service rendered by Ministry of Railways, some exemptions and relief in the transportation of passenger, catering & Goods services have been given which are mentioned briefly below:

  1. Exemptions have been granted from the levy of GST in respect of Passengers travelling in Second class, Metro, Sleeper Class, Transportation by Rail of Agricultural Produce, relief materials, milk, salt, food grain including flours, pulses and rice, railway equipment and materials, defence and military equipment, etc.
  2. Exemptions have been granted in respect of Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by Indian Railways Finance Corporation to Indian Railways; Inter-state movement of trains between stations/ workshops/ sheds/ depots, etc., for the purpose of carrying goods or passengers (or both) or for repairs and maintenance.

The impact of GST on different segments is detailed below: 

Passenger segment

  • Goods & Services Tax (GST) is being levied in place of service tax including cess on transportation of passengers by rail.
  • GST is being levied on the fare of passenger services in place of service tax (including cess) on the following classes:-
    • AC first class
    • Executive class
    • AC-2 tier class
    • AC-3 tier
    • AC chair car class
    • AC economy class
    • First class
    • AC and first classes coaches of special trains/coaches on FTR
    • All other type of first class and AC class coaches if any
    • The rate of GST is 5% on total fares (in place of 4.5% service tax levied earlier i.e. an increase of 0.5% only).
  • On concessional tickets GST shall be levied at the prescribed rate on total actual fare collected after concession/rebate.
  • In case of combined return journey tickets for AC & first class tickets, separate tickets for onward journey and return journey ticket may be issued in all cases whether for UTS tickets or for PRS tickets. However, for suburban UTS tickets for which journey originating/ terminating station is within the same state/same UTS issue of combined return journey ticket over suburban section shall continue.
  • Circular journey tickets for AC & first class tickets has been discontinued.
  • Issue of AC Class tickets from UTS counter has been discontinued.
  • Issue of cluster tickets from PRS for AC & first class tickets has been discontinued. However, issue of cluster ticket in UTS still continues.
  • In any other case if combined ticket are issued except season ticket the same will be discontinued and only point to point tickets will be issued in AC classes and First classes as proposed above.

Catering Segment 

  • The chargeable GST on catering services on railways is as under:-
    • For static units not having facility of air conditioning or central heating at any time during the year- 12% with full Input Tax Credit (ITC)
    • For Static units having facility of air conditioning or central heating at any time during the year- 18% with full Input Tax Credit (ITC)
    • For Rajdhani/Shatabdi/Duronto and other Mail/Express trains-18% with full Input Tax Credit (ITC)
    • GST on catering services of other premium trains like Tejas, Gatiman, Shivalik etc. is levied @ 18%.
  • The impact of new GST regime on catering is as given below:
    • In case of, Mail/Express Trains, the charges of on-board catering of Standard Meal Items will not change even after 1st July,2017 i.e. they will continue to be available on existing rates even after 1st July 2017 onwards- a big relief to passengers.
    • In case of Rail Neer, the charges have remained unchanged.
    • In case of static catering units on stations, the charges of Standard Meal Items have not changed.
    • In case of Rajdhani, Shatabdi, Duronto,Tejas etc trains where catering charges are included in the fare, the modified charges of catering component as per the new GST rules are effective.

Parcel Segment

  • GST has replaced service tax including Cess on transportation of Parcel traffic (leased or non-leased) by rail.
  • Goods and Service tax (GST) will be levied for transportation of all description of parcel traffic (leased or non-leased parcel traffic) and merchandise items (for commercial use) booked as luggage.
  • Luggage traffic i.e. personal baggage belonging to the travelling passengers, (excluding merchandise items for commercial use), is exempt from GST. The details of other commodities exempt from GST are given below:-
    • Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap
    • Defence of military equipment
    • Newspaper or magazines registered with the Registrar of Newspapers
    • Railway equipment or materials
    • Agricultural produce
    • Milk, salt and food grain including flours, pulses and rice
    • Organic manure
  • The rate of GST is 5% on total freight (in place of 4.5% service tax levied earlier- an increase of 0.5% only).
  • Goods & Services Tax is levied on the total freight as reflected in the Parcel Way Bill and /or Luggage ticket and /or Money receipt (in case of leased traffic) issued on or after 01.07.2017 and is collected at the time of booking and preparation of Parcel Way Bill/Luggage ticket/Money receipt.

 Freight segment

  • GST @ 5% is being imposed on transportation of Goods by rail (It is in place of 4.5% service tax levied earlier i.e. an increase of only 0.5%).
  • It is levied on total freight charges.
  • This rate is also be applicable to all ancillary charges levied on transportation of Goods Traffic.
  • Some essential commodities which have been exempted from levy of GST are as follows:
    • Relief material for victims of natural or manmade disasters, calamities, accidents or mishaps
    • Defence or military equipment
    • Newspapers or magazine registered with the registrar of newspapers
    • Railway equipment or materials
    • Agriculture produce
    • Milk, salt and food grain including flours, pulses & rice
    • Organic manure
Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.

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