Railway Contractors on South Central Railway to go on strike over GST

SECUNDERABAD: Over 300 railway contractors on South Central Railway are expected to join the nationwide strike by railway contractors from August 20. The contractors are unhappy about the impact of Goods and Services Tax (GST) on ongoing railway projects. The teething issues have resulted in most railway works in the state coming to a standstill. Contractors warn that the strike could paralyse the Indian railways and even compromise passenger safety.

Contractors say that railways should bear burden of GST on ongoing projects. A South Central Railway official said, “The Railway Board will mostly absorb the extra burden placed by GST on contractors.”

“The tax has gone up from 5 per cent Value Added Tax (VAT) to 12 per cent GST. Most construction materials and the special equipment we need now attract 18 and or 28 per cent GST. This has increased the operational costs of our ongoing projects. It is simply not possible for us to cover that cost,” said Keshava Rathnam, a contractor with SCR.

The GST Council had pointed out that contractors can avail the benefit of Input Tax Credit (ITC). However, contractors say it is not possible as many of the raw materials are procured without bills, rendering it impossible for them to claim ITC. “If we trade with unregistered traders who do not generate bills, we will have to bear the reverse charge. We had not factored these additional cost burden while submitting tenders for railway projects,” said Rathnam.

For a contractor with the SCR, the cost of a project ranges anywhere between ` 50 lakh and ` 100 crore. “The Railway Board has not taken any decision as of now but asked contractors to discuss their grievances with it,” said an SCR official. “Whatever the extra burden on them due to GST will most likely be absorbed by the railways,” he added.

Likely impact of strike

“Today, almost all railway works are being outsourced to private contractors. All track maintenance and related issues, signalling, telecommunication, construction and safety are all outsourced. Can the railways take a chance by compromising on any of these aspects?” asked a railway contractor.