AUGUST 22, 2017

By PG James

"INEVITABLY all sectors will be affected (with the GST rollout). Not to say that the Railways will be immune from this. We are studying the impact. In any case it is the law of the land so we will adopt it"

The above commitment to obey the law of land by Railways was given by Shri Suresh Prabhu, Hon' Minister of Railway before GST roll out. But sadly, it isn't so!

As per Sec 31(2) of CGST Act, 2017, a registered person supplying taxable services shall before or after the provision of service but within a prescribed period, issue a tax invoice showing the description, value,tax charged thereon and such other particulars as may be prescribed.

Further, as per the first proviso to the above sub-section, Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which–

(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(b) tax invoice may not be issued.

By virtue of the power bestowed under the aforesaid proviso, Govt. has framed rule 54 and exempted insurer, banking company, financial institution including a non-banking financial company, goods transport agency and passenger transportation service providers from the mandatory requirement of issuing formal Tax Invoice with the specified particulars as required under Sec 31 read with Rule 46 of CGST Rules, 2017. They can issue any other document in lieu of Tax Invoice whether issued or made available physically or electronically whether or not serially numbered and whether or not containing the address of the recipient but containing other information contained in Rule 46.

The relevant extracts of the said Rule is reproduced below:

"Rule 54 (2)- Where the supplier of taxable service is an insurer or a banking company or a financial institution, including a non-banking financial company, the said supplier shall issue a tax invoice or any other document in lieu thereof, by whatever name called, whether issued or made available, physically or electronically whether or not serially numbered, and whether or not containing the address of the recipient of taxable service but containing other information as mentioned under rule 46.

(3) Where the supplier of taxable service is a goods transport agency supplying services in relation to transportation of goods by road in a goods carriage, the said supplier shall issue a tax invoice or any other document in lieu thereof, by whatever name called,containing the gross weight of the consignment, name of the consigner and the consignee,registration number of goods carriage in which the goods are transported, details of goods transported, details of place of origin and destination, Goods and Services Tax Identification Number of the person liable for paying tax whether as consigner, consignee or goods transport agency, and also containing other information as mentioned under rule 46.

(4) Where the supplier of taxable service is supplying passenger transportation service, a tax invoice shall include ticket in any form, by whatever name called, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information as mentioned under rule 46."

As is evident from the above, there is no relaxation given to Railway from issuing a Tax Invoice as required under Sec 31(2) read with Rule 46 except for the specific class of suppliers.

Unfortunately, Railways still continue to issue Railway Receipts for freight and other services and original one is not parted with the customer and is retained at the destination for taking delivery.

They have issued a Circular dated 30th June as Rate Circular No 19/2017 bearing reference No TCR/1078/2017/19 wherein it was stated that Railway Receipt/Money Receipt shall act as Tax Invoice for availing Input Tax Credit.

Para 6 of the said Circular is quoted below:

"6.0 Under the GST regime, Railway Receipt/Money Receipt shall act as Tax Invoice certificate for availing input credit. Under TMS booking, a copy of RR will be sent as Tax Invoice to the customer via e-mail. Under manual booking, a copy of RR/MR will be transferred to a centralized location in the Sr.DCM office which will be fed in the system and Tax Invoice shall be transferred to the customer via e-mail"

In the Circular No TC-II/2910/2017/GST/2 dated 9.06.17 also, it was said that instead of issuing separate Tax Invoice, the RR/PWB/MR issued by Railways will also be treated as tax invoice and both system generated and manual RR/PWB/RR will be revised to incorporate the GST mandated information.

Instead of approaching GST Council or Govt to relax the mandatory conditions of issuing Tax Invoice and getting the Rules amended to treat RR/MR as Tax Invoice in line with the relaxation given to Banks, Insurance, GTA etc., how can Railways unilaterally take a policy decision that their RR/MR will be treated as Tax Invoice? The input tax credit being taken on rail freight is substantially high to the industries and as it had happened earlier, tax credit may be disputed at receiving end ultimately leading to unwanted litigation.

Though Service Tax on transportation of goods by rail was introduced with effect from 1 st October, 2012 they were not issuing proper Invoice as required under Rule 4 A of Service Tax Rules, 1994. In order to circumvent this statutory obligation, they had issued a Circular bearing No 29/2012 dated 28.09.12 stating that they will issue a consolidated Certificate which can be used by the customers for getting Cenvat credit of Service Tax. CBEC has not objected to this move of Railway authorities but denied the Cenvat credit amounting to crores of rupees since Consolidated Certificate issued by Railway was not a specified document as per Rule 9(1)(f) of the Cenvat Credit Rules, 2004 till the prospective amendment of Cenvat Credit Rules vide Notn 26/2014-CE(NT) dated 27.08.14 wherein the Railway Certificate has been specifically included.

Another controversial move of Railway was shifting Service Tax liability on 'Demurrage and Wharf age charges' on the recipient of service vide CircularNo.TC-I/2012/214/2Pt.I dated 15th December, 2016.

Cost of litigation is high in GST regime and both the Ministries of Railway and Finance under Govt are driving the assessees to unwanted disputes as the tax credits claimed on RR/MR are most likely to be denied. There was no clarification issued by GST Council or Govt on this and several tweets and re tweets made to GST@GoI, the official twitter handle of the Govt for queries on GST went unanswered.

It is unlikely that Railway will approach GST Council or Govt for granting any relaxation from issuance of tax invoice but Govt is duty bounden to rescue the taxpayers from unnecessary litigation through the amendment of Rules permitting ITC availment on the basis of the so called Railway Receipt or Money Receipt.

Since both Railway Board and CBEC are bodies of Central Govt, Circular issued by one should be considered as binding on the other. Inasmuch as the instructions contained in the Railway Circular dated 30th Junewith regard to ITC on RR is not rebutted by CBEC, silence on their part amounts to consent as per the legal maxim "Qui tacet consentire" (Who is silent gives consent.)

(The views expressed are strictly personal.)