In a bid to address potential Goods and Services Tax (GST) implications, the Indian Railways are examining alternatives for their payments to the exclusive freight track network. Tax authorities have signaled an 18 percent GST levy on remittances made by the railways to the dedicated freight corridors (DFC) totaling 1.24 lakh crore rupees.
These remittances, known as track access charges (TAC), already exceed 7,000 crore rupees annually and are projected to rise when the full 2,843-kilometer DFC network becomes operational in the upcoming fiscal year.
Normally, government-to-government fund transfers are exempt from GST. However, the Indian Railways have designated the Dedicated Freight Corridor Corporation of India (DFCCIL) as a special purpose vehicle (SPV), granting it autonomy to offer its tracks as a service.
While DFCCIL operates as a Zonal Railway for administrative purposes, all revenues from transporting goods or passengers are credited to the Railway account. Some of these allocations, including TAC, could soon face GST levies.
DFCCIL relies solely on reimbursements from the Railways to repay its debts, which amount to over 52,000 crore rupees, with major portions owed to the World Bank and the Japan International Cooperation Agency (JICA).
