Railway projects on Southern Railway halted over GST now back on track with CRB’s intervention by writing letter to the Finance Secretary requesting a one-time exemption for dealing with the impact of GST on project contracts awarded prior to implementation of the new taxation policy.
CHENNAI / NEW DELHI: Major capacity addition rail projects like the Chennai-Korukkupet quadrupling, Sengottai-Punalur doubling and other engineering works across Tamil Nadu and the rest of the country will now resume on Monday after a gap of two weeks as railway contractors have withdrawn their strike against imposition of Goods and Services Tax (GST) on project contracts awarded before July 1.
This came after the Chairman Railway Board Ashwani Lohani wrote to the Finance Secretary Ashok Lavasa on September 1, requesting a one-time exemption for dealing with the impact of GST on project contracts awarded prior to implementation of the new taxation policy.
The contractors were at loggerheads with the Ministry of Railways as from July 1, they had to pay 12-18% GST for contracts awarded before the new tax came into effect. This had decreased margins for the contractors as they would have to execute projects at a loss as earlier the tax was only between 1-4%. Contractors estimated that works to the tune of Rs 1 lakh crore were stalled across the country. Payments have been stalled since July 1, top railway officials said.
Lohani has asked for an early resolution to the issue to smoothly carry out the projects.
The request to grant the one-time exemption was keeping in view the principles of natural justice, fairness and reasonableness on part of the government, Lohani said in the letter. The impact of GST was unforeseen and the exemption was needed to get work done through existing contracts.
Lohani stated that the enhanced liability due to GST should either be borne by the railways or contracts should be closed without financial implications on either side. “A committee of three chief administrative officers has unanimously recommended that any extra tax liability in existing works contracts on account of GST should be borne by the railways on receipt of documents from contractors so that targets may be met,” the letter said.
A senior Southern Railway official said that though work would start from today, there was no clarity on the percentage of tax to be deducted. “An order from the Finance Ministry is expected soon,” the official said.