FEBRUARY 19, 2021

By P G James

NOTHING has changed over the past two months. Readers may kindly go through my article - Railways derail ITC by skipping E-Invoice.  

"Forgive them, for they do not know what they are doing"; the quote from Bible is to be re-drafted as "Do not forgive them for they know what they are not doing" so as to suit the apathetic behavior of Indian Railway with regard to overall statutory compliance and in particular to the generation of e-Invoice with effect from 1st Oct, 2020.

E-Invoice is implemented nationwide with effect from 1st Oct, 2020 and it heralded a new era in the Indian trade and commerce. E-Invoice scenario is intended to have tripartite 'machine-to-machine' exchange of invoice data between Govt, supplier and the receiver so that compliance becomes a part of natural process and the supply chain system. The menace associated with fake Invoice and fraudulent availment of ITC thereof becomes an impossibility with the full-fledged implementation of e-Invoicing.

As usual, Indian Railway authorities adopted contemptuous approach to all sorts of tax reforms and the latest being resistance to issue e-Invoice. Trade and industry made several representations to regularise issuance of e-Invoice with effect from 1st Oct, 20 but the same was merrily glossed over by issuing an internal Circular by Director, Traffic Commercial (Rates) of Railway Board bearing No TCR/1078/2020/GST/E-Invoice/CONCOR/333621 dated 11.01.2021 stating that they are "exempted" since they are providing passenger transportation service also which is an exempted service.

Vide Not No 13/2020-CT dated 21.03.20, exemption from e-Invoice is made available to those referred under sub-rules (2), (3), (4) and (4A) of rule 54 of CGST Rules. As per Rule 54(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.

Rule 48 (4) states that the invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common GST Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.

Class of registered persons notified by Govt, as per the above sub rule (4), amongst others include supplier of passenger transportation service also. It is a fact that railway provides passenger transportation service also whilst the more than 65% of their revenue is generated from the service of transportation of goods by rail. Merely for the reason that they are providing exempted supplies, exemption cannot be claimed from e-Invoice at an entity level as claimed by Railway.

They have got 82 active GST Registrations on pan India basis both as taxpayer and tax deductor and the message displayed in respect of all taxpayer registrations while checking the status of E-Invoice enablement of taxpayer from GST portal, it is shown as "You are enabled for e-Invoicing from '01-Oct-2020'.

FAQ's which Railway is relying upon has no legal sanctity and are issued only for educational and guidance purposes and many such answers are observed to be not holding good with the provisions of law.

"17. Which entities/sectors are exempt from the e-invoicing mandate?

a. Special Economic Zone Units

b. insurer or a banking company or a financial institution, including a non-banking financial company

c. goods transport agency supplying services in relation to transportation of goods by road in a goods carriage

d. Suppliers of passenger transportation service

e. Suppliers of services by way of admission to exhibition of cinematograph films in multiplex screens"

"18. The exemption from e-invoicing is w.r.t the nature of supply/transaction or w.r.t the entity?

It is for the entity."

A registered person can have diverse business some of which may be falling under the exempted category and it is a fallacious contention to claim exemption from e-Invoicing as it will enervate the very purpose behind the introduction of e-invoicing. Especially with regard to Railway, GST Dept may deny the ITC claimed based on such non-compliant Invoices at the recipient end and they will always eschew from taking any action for the contraventions against Railway.

It is high time that the concept of 'caveat venditor' (Let the Seller beware) instead of 'caveat emptor' be made applicable to the services provided by Railway.

During Service Tax regime also, Railways were reluctant to issue proper Invoices and not amenable to the changed environment and ultimately Ministry of Finance amended Cenvat Credit Rules by issuing Notn No 26/2014-CE (NT) dated 27.08.2014 specifying Certificate issued by Railway In lieu of Invoice for the purpose of claiming Cenvat credit.

It is said that "Cursus curias est lex curiae "meaning" The practice of the court is the law of the court".

Strangely, in our country, the practice followed by Railways becomes the ultimate law!!

[The views expressed are strictly personal.]