GST issues resolved in Sep-2024 once for all.pdf

GST issues resolved in Sep-2024 once for all.pdf

• 1.
  GST Issues Resolvedin Sep-2024- Once for all Closure of GST liabilities of RVNL SPVs Great milestone achievement by RVNL in coordination with the RVNL SPVs By Rajesh Prasad, 30.09.2024
• 2.
  Issue of GST •Issue of GST has been a cause of concern since July 2017. • RVNL & Administrative Ministry represented to MoF for non-applicability of GST. • GST Council did not agree with the view of MoR. • Administrative Ministry issued letter on 21.09.23 advising SPVs that the concessionaire shall pay all taxes and duties in accordance with applicable laws. • SPVs represented on 04.10.2023 against the instructions of MoR. • Rly. Bd. then issued guidelines for issuing GST invoices for O&M charges against SPVs and raising of GST invoices from SPVs for User on 30.11.2023. • These guidelines seemed to be detrimental for the financial health of the SPVs.
• 3.
  ❑ Against this,the letter of Railway Board dated 21.09.23 needed to be reviewed and withdrawn. ❑ It seeks to treat GST as being part of the apportioned revenue, thereby making drastic reduction in the net revenue receipt to the SPVs. This made the Financial Model of the SPVs which was approved by Min of Railways, totally unviable. ❑ Having objected to imposition of GST on the transactions between SPVs and IR, it would be highly misleading and illogical for Min of Railway to treat now that GST amount payable to the SPVs by IR is included in the apportioned Revenue earnings. This could have crippled SPVs’ ability to service their debts and led to their bankruptcy. THE MOVE FORWARD…
• 4.
  Status of taxationon the Apportionment Earnings & Operation & Maintenance Cost (SPVs) got reviewed…
• 5.
  Brief background forthe fight.. Concession Agreement: SPVs have right to receive from MoR- its share in accordance with the rules of inter-railway apportionment of earnings, of the tariff collected from the freight traffic originating, terminating and moving on the Project Railway, including haulage charges collected from container operations, after deduction of Operations and maintenance costs, in accordance with the Project Related Agreements
• 6.
  Taxability during ServiceTax Regime • During Service tax regime, the Hon’ble Customs, Excise, Service Tax Appellate Tribunal (Tribunal) in the case of CST Delhi-III, New Delhi v. Bharuch Dahej Railway Company Ltd 2019-TIOL-1175- CESTAT-DEL held that Service tax was not leviable on the transaction between the SPV and Ministry of Railways (Government of India). • Service Tax was not applicable as the apportioned earnings net of O&M cost being passed on the SPVs by MoR is a “Return on Investment”.
• 7.
  POST GST REGIME •After implementation of the GST, SPVs wrote a letter to the Railway Board to take decision on the implementation of the GST. • Vide Letter No. 2017/Infra/18/2 dated 10th June 2022, a direction was issued by the Railway to Zonal Railways that the issue of Applicability of GST on Apportioned Revenue of SPV and O&M Cost for SPV is pending for clarification with Ministry of Finance. Hence, no suo-moto action should be initiated by Zonal Railways in the context for levy of GST on the Apportioned Earning of the SPV and O&M cost till any final decision from the Ministry of Finance is received. • An Office Memorandum of Ministry of Finance dated 04.01.2023 was issued, in which it was informed that “Indian Railways and the SPV are distinct persons. Supply of services by SPV to IR by way of allowing IR to use infrastructure built and owned by them during the concession period against consideration in the form of pro rata share of revenue is a taxable supply. Similarly, a service of maintenance supplied by IR to SPV is a taxable supply. Cont….
• 8.
  in cont…. • Videletter dated 21st September 2023, MoR has advised, while referring to the Office Memorandum dated 04th January 2023 issued by MoF on GST Council Decision, “From current FY (2023-24) onwards, IR would transfer apportioned revenue to SPVs Inclusive of GST” For period prior to 2023-24, the matter is still under consideration in consultation with Ministry of Finance. It is brought to notice that Clause 23.2.1 of the Model Concession Agreement already provides for “It is expressly agreed by the Parties that the User Fee shall be inclusive of all taxes and duties.it is further agreed that the Concessionaire shall pay all taxes and duties in accordance with Applicable Laws. • Further, vide letter dated 30/11/2023, Director/Accounts Railway directed to SPV to raise invoices for October 2023 on user fee/apportioned revenue as per guidelines so that payments can be arranged accordingly. Joint representation of MDs of SPVs has requested MoR to immediately take the above concerns into view and direct to modify Railway Board letters dated 21st September and 30th November 2023, to facilitate GST compliance & provide GST over & above the apportionment earnings.
• 11.
  RVNL coordinated withall SPVs and made strong joint representation verbally followed by written submission to MOR. This was followed by filing Court case in High Court
• 12.
  GST exemption onthe transactions between Special Purpose Vehicles (SPVs) and Ministry of Railways. 53rd GST Council exempted GST on the transactions between SPVs and Ministry of Railways. Ministry of Finance vide its Circular No. 228/22/2024-GST (F.No. CBIC- 190354/94/2024-TO(TRU- II)-CBEC dated 15th July 2024) has put forth the following clarification against the exemption of GST on the transactions between Special Purpose Vehicles (SPVs) and Ministry of Railways (Indian Railway). As recommended by the 53rd GST Council, GST on the supply of services by SPVs to Ministry of Railways (Indian Railways) by way of allowing it to use infrastructure built and owned by them during the concession period against consideration and maintenance services supplied by Ministry of Railways (Indian Railways) to SPVs in relation to such use of infrastructure built and owned by SPVs during the concession period against consideration is hereby regularized for the period from 01.07.2017 to 14.07.2024 on ‘as is where is’ basis.
• 13.
  GST exemption onthe transactions between Special Purpose Vehicles (SPVs) and Ministry of Railways. Ministry of Finance, Department of Revenue, vide notification No. 04/2024-Central Tax (Rate), dated 12th July, 2024, has modified the Central Goods and Services Tax Act, 2017 (12 of 2017) as indicated below and the tax against this entry has been shown as Nil: 9G: Services provided by Special Purpose Vehicles (SPVs) to Ministry of Railways (Indian Railways) by way of allowing Ministry of Railways (Indian Railways) to use the infrastructure built and owned by them during the concession period against consideration and services of maintenance supplied by Ministry of Railways (Indian railways) to SPVs in relation to the said infrastructure built and owned by the SPVs during the concession period against consideration.
• 14.
  The issues relatedto SPVs fully resolved by 30.09.2024