As Policymakers huddle, Indian Railways still not ready for GST

GST rollout vital for Railways and Logistics sectors – The feeder routes are the existing railway routes, on which much work is required. Better connectivity between the ports and manufacturing facilities would be required once the GST gets implemented

NEW DELHI: It is virtually a race against time for Indian Railways as the April 1 deadline for the Goods and Services (GST) Tax rollout stares at them. While India Inc. have appointed consultants to advise them on GST, nothing much has moved beyond that especially with small and medium enterprises. However, India’s largest Public Sector transporter ‘Indian Railways’ opines they can meet the April 1 deadline. Conversations with multiple stakeholders within Railways reveal that not more than 40-50 per cent of its Gazetted/Non-Gazetted employee resources are ready for a GST rollout on April 1.

It is irony that the internal processes within Railways Finance, Accounts and Commercial Branches were yet to be GST-Compliant and can meet the April 1 deadline. The big challenge is that the tax implications in the GST regime have to be wired into the Enterprise Resource Planning (ERP) systems, which is only possible when the final law is out.  However Indian Railways do not have a proper foolproof ERP in place as on date. All this has to be coded into the software and without the final outcome of the GST policies, it is impossible to compute what the tax implication of various transactions will be for Indian Railways. There are more parts to the jigsaw puzzle, such as “who will assess you, which slab your product will fall under, what is your jurisdiction etc. Once the final law is in place, then only can Indian Railways make the next leap in terms of their GST preparedness,” said an Official from Secunderabad based Centralized Training Academy for Railways Accounts (CTARA).

Ajay Seth, Chief Financial Officer, Maruti Suzuki, says the company has an internal cross-functional Task Force team that has been working on various aspects of GST compliance. “We are configuring our business processes, IT and ERP solutions based on clarity available on GST. A rollout plan for migrating to GST has been prepared, which includes an impact study, managing transition, changes required in IT network and training, etc.”

With nothing conclusive yet following the four-tier rate structure that was announced in November, India Inc say it is difficult for them to move forward. “The basic framework is there, but the software will have to be put in place and our suppliers and distributors will have to be made aware of the need to move to GST. All this requires time,” says a representative from a manufacturing industry.

NASSCOM voiced its concerns over issues such as tax treatment of software, and also make a case for single registration under the new GST regime during the last GST Council meet. “We support the introduction of GST but the implementation of GST should not complicate the business operations of IT companies,” R Chandrashekar, President of NASSCOM, told. He said the software association would express concerns with regard to GST implementation during the meeting with GST Council on Tuesday. NASSCOM’s concerns pertain to areas like classification of software, import of services from related parties, and taxation rules based on location of receiving services etc. Stating that the first draft of GST law had classified all ‘intangibles’ as services thereby ensuring a uniform tax rate, the revised law removed the clarification. “This could lead to a situation where software classification can be disputed even under the GST regime. Electronic downloads should be treated as services as the majority practice prevalent globally,” according to NASSCOM, which also contends that revisions in the draft GST law does not facilitate offering a single interface for overseas/domestic clients in cases where large service contracts are supplied to multiple client sites from single or multiple delivery centres. Also, the revised draft potentially makes onsite services delivered overseas at customer site liable to payment of GST, followed by a refund which blocks capital and complicates the transaction, it added.

“This will therefore imply that onsite services are imported into India, GST discharged, and then exported, and the GST paid on the onsite service then filed for refund – additional unnecessary transactions for companies which operate in a Branch office model, and associated compliance and working capital troubles,” says NASSCOM which also views that the legislation should clearly provide for centralised registration of Central Taxes of IGST (Integrated-GST) and CGST (Central GST), which is within the Central Government power itself.

“I am not sure whether the industry is actually  prepared for GST by April. The ones who started early may have an advantage, but there are many who don’t have anything in place even now. One reason for going slow is because the (GST) Bill is still under discussion. My guess is that the fence-sitters will get serious the moment the Bill is cleared in Parliament,” said FICCI representative.

“Companies in manufacturing/production/services/eCommerce/IT/banking/insurance/media and entertainment/auto ancillaries sectors etc were conscious of GST early on and did begin their groundwork in time. But, the Railway sector is not quite ready for an April 1 rollout,” says Sachin Menon, Partner and Head of Indirect Tax at KPMG.

Nihal Kothari, Executive Director, Khaitan & Co, says one of the reasons for the slow pace of work on the part of Public Sector organisations is on account of the ongoing talks and deliberations between the Centre and states pertaining to GST. “The dual control of assessees (tax payers) has not been resolved yet. This is a crucial issue. The GST Council meeting earlier this month was inconclusive because of this. The hope is that it will get resolved with the latest round of meetings this week,” he says.

The GST Council, chaired by the Union finance minister and comprising all state finance ministers, is meeting regularly to iron out the differences on GST. It is only after this, say tax experts, that the government can get the GST Bill into Parliament for it to be cleared.

Despite the challenges, some companies remain optimistic. “I had the benefit of shifting to India last year from Malaysia, which happens to be the last country to have moved to GST,” says Roland Folger, Managing Director and CEO of Mercedes-Benz India. “Since October last year, we have been preparing ourselves. We have an external partner helping us to be GST-ready. Our component suppliers and dealers are also getting ready. We are conducting training sessions for them.”  G N Gauba, chief financial officer at Motherson Sumi, says: “Most of our tier-II and -III suppliers follow similar systems like us and, therefore, should not have a problem to migrate to GST even as we do it. We have a group-owned IT company with which we have been working on the IT aspects of GST.”

The Finance Minister has made a number provisions for the port and logistics sector, including plans for 2,000-km coastal roads in the Union Budget but experts feel that more details about the GST roadmap and its impact on the sector should have been shared with the market.

Allcargo Logistics Ltd Executive Director and COO, Prakash Tulsiani said the Finance Minister has only mentioned about IT systems for GST rollout but the GST roadmap has not been spelled out. The budget has made provision for the sector but connections between GST and budgetary provisions have not been explained, he said.

GST implementation

Arif Patel, Vice-Chairman of Patel Roadways, said the budget provisions for logistics sector should have been synchronized with the implementation of GST. If the GST does not get implemented, it will have repercussions on the sector, he warned.

Tulsiani said the Budget has been focused on rural and agriculture development, which will spur the consumption in the country. This will bring new businesses to logistics companies. But better connectivity between the ports and various manufacturing facilities would be required once the GST gets implemented. Therefore, there should have been higher allocation for national highways.

Freight corridors

There should have been better clarity on Dedicated Freight Corridor (DFC) project and the status on the feeder routes, which will service the DFC. The feeder routes are the existing railway routes, on which much work is required. Capital outlay also not been defined for this project, he said.

Patel said that provisions for port and coastal road connectivity has been made but till date the road leading to the JNPT port is congested. In spite of JNPT being one of the largest port in the country, the port still faces traffic bottlenecks. Therefore, the government has to walk the talk as far as infrastructure development is concerned.

Tally Solutions sign MOU with FICCI (Karnataka Chamber) for training 2,50,000 executives on GST

Recently, Indian software product company Tally Solutions has signed an MoU with The Federation of Karnataka Chambers of Commerce & Industry (FKCCI). The partnership involves training of about 2,50,000 direct and indirect members of FKCCI by Tally Solutions. Tally will train the participants on GST preparation and transition as part of this collaboration. The MoU was announced at an event held at Le Meridian, Bengaluru. Tally will hold GST awareness sessions in every district of Karnataka for FKCCI members, an official said.

Speaking about the MoU, Tejas Goenka, Executive Director – Tally Solutions said, “We are delighted to have collaborated with the FKCCI for GST awareness for their members.  FKCCI is the single largest commerce and industry body in the state of Karnataka and this tie-up will allow us to reach out to all their member businesses and prepare them for GST transition. The recently announced budget has paved the way for GST with the finance minister talking about the government’s reach out starting 1st April for industry readiness. As a company, which has been the technology partner for SMEs, we are proactively reaching out to businesses across industries for the same and consider it our responsibility to educate and help them to successfully comply with GST. This association is another step in that direction.”