Union FM urged to defer the move to hike GST on railway products by the RASA

The Railway Suppliers Association (RASA), based in Coimbatore, has requested the Union finance minister Nirmala Sitharaman to postpone a recent decision to increase the Goods and Services Tax (GST) on railway products to 18 % from 12%. The association currently has Micro, Small and Medium Enterprises as its members from South India.

The FM on 30th September had made an order to increase GST from the present 12% to 18% for all the railway products covered under HSN chapter 86. It covers locomotives of railway and tramway, and the rolling-stock and its parts. The chapter further includes the railway or tramway track fixtures, fittings and their parts. The HSN chapter 86 also covers mechanical traffic signalling equipment of all kinds, including electro-mechanical equipment.

S Surulivel, the RASA president, wrote a letter to Union FM. He stated in the letter that the price increase decision would impact suppliers from small industries on raw materials, which has, in turn, increased the manufacturing cost by 25 to 40%.

The organisations manufacturing railway products release the purchase orders in advance by 9-12 months. Therefore, orders for the upcoming year were issued last month. The railway product manufacturers are demanding the cancellation of orders or re-fix the date of delivery without penalty. In such circumstances, the railway department will not compensate for the rise in GST if the supplies are affected after the original delivery date. According to the president of the RASA, the small industries have to incur a further loss in such cases.

Surulivel has requested on behalf of its members that GST at 18% for railway products must be applicable from April 2022. Such deferral helps suppliers of small industries to plan effectively and provide them sufficient time to close the existing orders without incurring more losses.

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For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in

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