Why Road and Railway Should be Exempted under GST Regime?

GST or Goods and Service Tax, the biggest indirect tax reform since Independence, was implemented in India on 1st July 2017. GST is a comprehensive tax levied on the supply of goods and services across India, replacing multiple taxes levied by the central and state governments. GST is aimed to create a single market in India, remove overlapping taxation and create a uniform structure of indirect taxation.

Under GST, all goods and services are classified under four tax slabs - 5%, 12%, 18% and 28%, and it is applicable to all types of goods and services except for a few which are exempted. One of the areas where GST has been controversial is the transportation sector. The Indian transportation sector includes both road and rail transport, and there has been a lot of debate on whether it should be exempted from GST or not.

Why exempt road and railway from GST?

Road and rail transport is a critical component of the Indian economy, and it is vital for the growth and development of the country. The Indian transportation sector is highly fragmented, and it is dominated by small and medium enterprises. Road and rail transport providers have to deal with complex tax structures, including multiple taxes like excise duty, service tax, and VAT, which made the transportation of goods expensive and complicated. The transportation industry was looking for a simpler taxation system that could replace the existing tax structure.

Exempting road and railway from GST was one of the key demands of the transportation industry. They argued that the inclusion of road and rail transport under GST would increase the transportation costs, which would ultimately push up the prices of goods and services.

What are the benefits of exempting road and railway transport from GST?

The exemption of road and railway transport from GST will have several benefits, including:

1. Reduced transportation costs: Exempting road and railway transport from GST will reduce the transportation costs, which will ultimately reduce the prices of goods and services.

2. Simplified taxation: The transportation sector was previously burdened with multiple taxes like excise duty, service tax, and VAT, making the taxation system complicated. Exempting road and railway transport from GST would simplify the taxation system, making it easier for transportation providers to comply with the regulations.

3. Competitive advantage: Exempting road and railway transport from GST would give a competitive advantage to the Indian transportation sector compared to other countries, where transportation is subject to multiple taxes.

Arguments Against Exempting Road and Railway from GST

While there are several benefits to exempting road and railway transport from GST, there are also some arguments against it.

One of the arguments is that exempting road and railway transport from GST would lead to revenue loss for the government. Road and railway transport is a significant contributor to the Indian economy, and exempting it from GST would lead to a decrease in revenue collection.

However, the government has already exempted several services and goods from GST, including education, healthcare, and some agricultural products, which has led to a decrease in revenue collection. The government needs to balance the revenue collection and the needs of the transportation industry.

Conclusion

The transportation industry in India is critical for the growth and development of the country, and simplifying the taxation system for this industry is essential. The exemption of road and railway transport from GST will have several benefits including reduced transportation costs, simplified taxation, and a competitive advantage for the Indian transportation sector. However, the government needs to balance the revenue collection and the needs of the transportation industry to ensure that GST is successful in achieving its goal of creating a single market in India.