Manufacturers of rail equipment have welcomed the GST Council’s decision to raise GST on rail equipment such as wagons, coaches and rolling stock to 12 percent from 5 percent. Metro rail coach-makers are also set to get a similar push. The move will increase the competitiveness of the products made in India, said Alstom, Bombardier, Wabtec, and other rail-equipment makers.
This was a pending demand of railway wagon, coach and engine manufacturers and had been raised by the Confederation of Indian Industry (CII). Recently, Wabtec, the company that acquired GE Transportation, had explained that input components attract a tax of 12-18-28 percent. This creates a situation when there is a higher tax on inputs and lower tax on output products.
This led to an increase in cost, which had to be borne by the manufacturers to the extent of the gap between the taxes. “The announcement to increase GST rate from 5 to 12 percent on rail goods reinstates the government’s intention to bring the (Indian rail) industry back on track,” said Anand Chidambaram, Chairman, Rail Transportation, and Equipment Division, Confederation of Indian Industry.
Boost to Make in India
Alain Spohr, Managing Director, India, and South Asia, Alstom, said the move will provide a huge impetus to global organizations such as Alstom to continue supporting the Make in India program.
Sudhir Rao, Managing Director, India, Bombardier Transportation, said the GST Council’s move will “remedy the inverted duty structure that has burdened rolling stock manufacturers for over two years, besides resulting in lower prices to various metro companies across the country; this will also level the playing field for companies such as Bombardier, who have invested heavily in India to provide world-class railway systems and products”. Sandeep Selot, Managing Director, GE Diesel Locomotives Pvt Ltd, said the GST move will boost the Make in India initiative, while the reduction in corporate tax will go a long way in competing in global markets.
Finance Minister Nirmala Sitharaman has also announced a cut in GST on marine fuel from 18 percent to 5 percent. She said that 0.5 percent FO has been added, a move which seems to indicate low sulphur fuel oil will also be charged at 5 percent GST, although shipping industry players are awaiting further clarity.