These payments take the form of track access charge (TAC), which currently stands at over Rs 7,000 crore annually. This figure is expected to rise as the entire 2,843 km DFC network becomes operational next financial year.
Normally, money transfers between different government entities are exempt from GST. The Dedicated Freight Corridor Corporation of India Limited (DFCCIL) has been registered as a Special Purpose Vehicle (SPV) under the Indian Railways, giving it the status of an independent entity providing rail services, the report said.
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For administrative purposes, DFCCIL is categorized as a zonal railway. This means that any income from the transport of goods or passengers is credited to the railway’s account. The railways then disburse money under different heads depending on the need of a zone. TAC is one such head that may now face a GST levy.
To address the problem, an official familiar with the matter said they could change the head of accounting to soften the impact of the tax liability.
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It is important to note that Indian Railways funds are the only source of income for DFCCIL, which has to repay debts borrowed from multilateral institutions. The World Bank and the Japan International Cooperation Agency (JICA) alone owe over Rs 52,000 crore for the freight corridors.
The dedicated freight corridors or DFCs are seen by Indian Railways as a game-changing gambit to increase the railways’ modal share in the total freight traffic movement across the country.