The government is considering ways to provide relief to the makers of railway components, according to a senior official, as such vendors have seen their costs rise after the goods and services tax was rolled out.
Suppliers of parts to the national transporter pay 18 percent tax on inputs but the levy on finished goods is 5 percent. This inverted duty structure has led to accumulation of input tax credit since they pay a lower output tax. According to Udit Gupta, partner at law firm Udit Kishan & Associates, the distortion is leading to accumulation of 12 percent of the turnover as credit.
The government now plans to increase the GST on wagons and bogie components, among others, to 12 percent from 5 percent, or refund the credit, the official quoted earlier said—he spoke on the condition of anonymity as no decision has been taken yet. Read More