NEW DELHI: A rail versus road competition is building up, as the Railways Ministry has opposed a plan to impose 12.5% Goods and Services Tax (GST) on container transport operations.
With the GST regime scheduled to take effect from July 1, a uniform tax of a mere 5% is proposed for the road sector.
“Because of this discrepancy, the rail sector will be put to grave disadvantage,” the Railways said in a letter to the finance ministry.
With the onset of the GST regime, a marginal hike is likely in passenger fares. But container services will take a hit if the current proposals are implemented, a senior ministry official warned.
Over the past decades, the Railways have been losing freight transportation share to roads and ships, but remains a strong player in container operations. From an estimated 70% in 1947, the market share of Railways’ freight operations has fallen to an estimated 30% today.
So far, the tax on freight operations, including container trains, has remained at 4.2% of the total transportation cost.
The rollout of GST will also translate into a marginal hike in passenger fares. The tax will increase from the current 4.3% of the fare to 5%