Shiny new projects: But are we taking care of what we already have?

Howrah-Mumbai route - A highly congested mainline with IR

The 508 km Mumbai–Ahmadabad bullet train project began with an estimated cost of around ₹1 lakh crore. Today, that figure has already crossed ₹2 lakh crore, and by the time the first train runs, it may go even higher. Does this mean India should avoid investing in bullet trains? Absolutely not. High-speed rail is important and should be welcomed.

In fact, Indian Railways has already begun viability studies for new high-speed corridors across the country. Recent reports suggest proposed routes spanning nearly 4,000 km, with an estimated cost of ₹16 trillion, including corridors such as Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, and Delhi-Varanasi. Ambition is clearly not lacking.

But ambition alone is not enough.

The real question is whether we are giving the same level of attention to existing railway assets.

Railways are modernizing stations and introducing new rolling stock like the Vande Bharat(VB) trains, including upcoming sleeper versions. Yet, despite their design capability, Vande Bharat trains are not running anywhere near their full potential speeds on most routes. Only a few short sections allow them to operate faster, while across the rest of the network, time savings compared to older trains are sometimes not enough to justify their fares.

This is not a new problem. Even before Vande Bharat, India had trains capable of higher speeds. The Gatimaan Express, introduced in 2016, was rated for 160 kph, but it could sustain this speed only on the Delhi-Agra section. The Tejas Express, launched in 2017 and also rated for 160 kph, usually runs at around 130 kph and that too not across its entire route. Shatabdi trains, introduced back in 1988, can reach 150 kph only on select stretches. Rajdhani and Duronto services face similar limitations.

These examples point to a clear issue: the constraint is not trains, but infrastructure.

Upgrading existing tracks, signalling systems, fencing, and maintenance standards requires sustained investment and execution. Without this, new trains and new projects will continue to underperform.

The same pattern is visible beyond passenger services. The Dedicated Freight Corridors(DFC) were announced in 2005, yet while the Eastern DFC is operational, the Western DFC is still expected only by 2026 - nearly two decades later. Meanwhile, Vizhinjam International Seaport has already become functional, but its dedicated rail link is incomplete. Cochin Port, operational even before Independence and strategically located near international shipping lanes, has weak rail connectivity, with only about 25–27% of cargo moved by rail.

Because inland waterways and coastal shipping remain underdeveloped in India, this shortfall pushes even larger share of long-distance hinterland freight onto already congested roads. Again, the issue is not the absence of new projects, but the underutilisation of existing ones.

There is also a softer, but equally important, aspect-civic sense. Modern trains like Vande Bharat often become unclean by the end of a single journey. Infrastructure investment alone cannot solve this. Civic responsibility must be treated as seriously as technical education, starting at the school level.

India’s railways undoubtedly need new lines, faster trains, and ambitious projects. But progress cannot come only from what is new and visible. Reducing general and sleeper coaches while increasing AC coaches may improve revenue figures, but it will not automatically improve mobility or logistics efficiency.

True modernisation lies in balancing new investments with systematic upgrades of what we already have. Without that balance, even the most glamorous projects will fall short of their promise.

Sajeev

References

1. Railways begins viability assessment for 7 new bullet train corridors - BS

An Interesting One Time Settlement(OTS) with IDBI Bank

There are some common practices in banking and finance. One such practice is, if you borrow money from a bank then you need to pay it back with interest. If you fail to pay, then bank will take appropriate actions to recover the money. Well, this is for common people. In the case of agriculture loans; based on government directives banks may write off the loans fully or partially. 

There are a separate set of rules for corporate sector called 'Insolvency and Bankruptcy Code (IBC) 2016'. This allows creditors to recover the money in case of default using insolvency proceedings. Under IBC, creditors may not get the whole amount. This however provides a meaningful resolution to the problem. IBC doesn't allow defaulting promotors to acquire the company under insolvency proceedings and there is a good reason for that.

What happened in this specific case is, lenders led by IDBI bank (49% owned by LIC) initiated bankruptcy proceedings against Siva Industries in 2019 for an amount in the tune of 5,000 crores. International Asset Reconstruction Company holds - 22%, IDBI Bank - 17%,  Union Bank of India (UBI) - 12% of the admitted debt. Other lenders are LIC, SBI, Yes Bank, and Bank of India. Well, company's liquidation value seems to be well below 5000 crores. 

Banks later agreed to a one-time settlement (OTS) offer from Siva Industries’s promoters (part of Aircel founder C Sivasankaran’s group). Under this settlement, banks will get 10% of their money. IDBI says, this amount is better than that of the company's liquidation value and agreed to a one-time settlement. By the way, OTS is not against the law. Even if insolvency proceedings don't allow defaulting promoters to acquire their company; bankers can still do a one-time settlement with lenders if enough of them agree. Under this Siva group will get their company back and can come out of the liquidation process. All are happy, right? 

Well no. Banks may get more money compared to the liquidation process; but they forget the fact that it is the same promoter who actually owes that much to them. Its like your company take a loan of 5000 crores from a bank, company default on payments, the bank took over the company, after some time you pay 500 crores (10%) to the bank and take control of your company. This can act as a template for any promotor to come out of insolvency proceedings in the future. If one bank can accept it and one promoter can get their company bank then what stops others from trying? After all, it's not against the existing law!!! 

The sole loser here is the Indian banking system, which losses money on deal after deal. Their NPA rates are going to create new records. Regulators should intervene and make sure to close all the loopholes in the law. OTS should not end up as an easy way for promotors to default, don't pay, and still retain the ownership of the company.  

Sajeev

Kochi - Koottanad - Bangalore - Mangalore (KKBMPL) gas pipeline: A new(delayed!!!) dawn in South India's gas future

Terminal at Kochi

When state owned Petronet LNG commissioned a regasification terminal at Kochi, there was hope that homes and industrial sites from Kochi to Mangalore and Koottanad to Bangalore will receive piped gas; atleast in the cities through which the pipeline goes; days of cylinder gas are numbered etc.

However, it took more than 7 long years to complete the main pipeline itself. Finally at the beginning of this year, Kochi-Koottanad-Mangalore line was commissioned. Work is in progress on Kootanad- Palakkad-Krishnagiri-Bangalore stretch. Pipeline itself is 1,104 km long, developed and operated by GAIL. This pipeline passes through Kerala, Karnataka, Tamilnadu and Puducherry. 

Though late, it looks like a great achievement. However the devil is in the details. Kochi LNG terminal was commissioned in sep 2013 with a capacity of 5mmtpa(million metric tonne per annum). It took a very long time to build associated pipeline network. Main reasons were, opposition from people on safety grounds; land price disputes; and to get the right of way. Political leadership was also not able to bring any solution to the table. So the issues continued. Meanwhile, the estimated cost for pipeline jumped from  2915 crore to 5750 crore. Remember the terminal itself costed 4200 crore only. 

Terminal at Kochi

Not only that, in the absense of pipeline network, there aren't many customers. LNG terminal's utilization is just 10-20%. Can you imgine a plant running at such abnormally low utilization for 8 long years? Even after commission of Mangalore line max-utilization will be around 25-30% only!!!

Meanwhile, Dahej terminal which launched with 5mmtpa capacity in 2004 doubled its capacity to 10mmtpa in 2009. Added 5mmtpa more in next 7 years. Then 2.5mmtpa in two years after that. Now Dahej's total capacity stands at 17.5mmtpa. From 2013 to 2018, in 5 year time span Dahej handled 1000 cargos. How much Kochi handled? around 45. Out of that, 18 were for reload and 2 were for bunkering. Hence effectively 25!!!

Today pipeline supplies 3.8mn m3 of gas everyday in Kochi.

The delay is criminal; its not that state government got nothing from the project. Kerala government will get significant amount of money as taxes (approximately 1000 crore a year). 

If this project was completed 5 years back, then LNG termial utilization might have been very high by this time. Who knows; Petronet may even double its capacity. Kochi had a chance to become a major gas hub of India. 

There were some dealys due to completing technically challenging 540m stretch which crosses Chandravati River in Kasarkode district of Kerala. Here pipeline goes upto 8m in river bed. However here the river flows through a valley and elevation difference can be as high as 150m. Which made the construction difficult.

Hope that state governments will learn something from these long delays, and the money it costed to the exchequer. 1) Missing tax revenue, 2) Utilization losses at Petronet LNG terminal 3) Delayed gas network construction across south India 

Engaging with people and derive a political solution for the problems in time is one of the reason why people elect their representatives. Why its not happening with the required urgency? Its something which all political parties in Kerala should think. 

Sajeev

Haryana - Breaking something which is working (The Haryana State Employment of Local Candidates Bill – 2020 aka Reservation in Private sector)

DLF Cyber City (courtesy: Wikipedia)

Gurgaon/Gurugram is one of the largest IT hubs in India. Located just 30km away from New Delhi, this city is part of the National Capital Region. The rise of Gurugram started when Maruthi Suzuki opened their plant there. A couple of decades later GE came. This was followed by DLF acquiring large swaths of land and building a modern city. Numerous companies came and set up their base or operations there. Proximity to the national capital, helped a lot in its growth.

You might be thinking why I am talking about Gurugram when the title states 'The Haryana State Employment of Local Candidates Bill'. Well, let us come to that, 

As per the 'Haryana State Employment of Local Candidates Bill',

a) 75% of jobs in the private sector, which offers a salary of less than 50,000 rupees/month, is reserved for people from the state.

b) 10% of that quota should be filled from the district where company is located.

c) Reservation is initially for a period of 10 years.

d) The rule is applicable to all companies, partnership firms, societies, trusts, limited liability partnership firms, and any person employing 10 or more people.

e) Objective is also to discourage, migrants seeking low-paid jobs.

f) Private establishments can claim exemptions if candidates of desired skills are not available. This is subjected to evaluation by a government officer.

g) Companies must register all employees who earn less than 50,000/month on a designated portal within 3 months of the bill coming into effect. 

h) Employer cannot hire a new person if this registration is not completed.  

i) Failure to provide 75% of new employment to local candidates will attract a fine between 50,000 to 2,00,000 rupees. An additional penalty of 1,000 rupees till they comply.

First, this law might not even be constitutional.

Second, Haryana and her industrial sector functioned just fine without these laws. Every state needs to reduce the unemployability rate but by generating more jobs and skilling the people; not by forcing private companies to work as government companies. Tomorrow other states can also restrict private jobs to their own domiciles; which is very much against the concept of India as a single country. Already ever-increasing percentage of reservations are depriving people of the opportunity in the government sector. The reservation was originally meant for SC and ST, who did indeed deserve that. However, nowadays every group that can assemble a bunch of people to show strength (and bring a region to stand still) demands reservation, and political parties gave in for their demand. 

A lot of people earn less than 50,000 a month. This covers most of the industrial, SME workforce. If a person likes to start an establishment of 100 people, which may make good profit using cheap migrant labour (partially) must employ 75 locals with higher wages. Probably that person might drop that idea; and we may import that item from China.  

This law also brings back the inspector raj. A government employee must certify that the company is compliant or people with the required skills are not available. This decision-making power is equivalent of giving those government servants an ATM machine. Inspector raj and license raj broke India and collapsed our economy in the past. We need to reduce the overbearing power of the government not to boost it. 

When I mentioned Gurugram, I also mentioned a lot of companies. Maruthi Suzuki was then owned by the Government of India and Suzuki Corp of Japan. GE is a US-based multinational.  Owners of DLF are from Uttar Pradesh. Other prominent companies in Gurugram Cargill India, Coca Cola, Honda, Oracle, Ericson, Pepsi, Google, Nestle, Hindustan Unilever, Reckitt Benckiser, Panasonic, Samsung, Accenture, Deloitte, KPMG, IBM, EY, Escorts Group, Hero Moto Corp, Alcatel, Sony, Whirlpool India, Bharti Telecom etc are from outside and generated a lot of opportunities for locals and provided a lot of revenue for state government. Remember a good percentage of Haryana’s revenue comes from Gurugram.

Politics

In the politically charged climate of the area, where farmer agitation is still going on this is a kind of offer to placate the people. This way government can take the easy way out; don’t have to worry about how to generate new jobs, but to take away the jobs which are already created by someone using their hard work. 75% reservation was the political promise of Jannayak Janta Party (a member of ruling BJP alliance). 

The irony of the fact is, in 2008 one of the founders of JJP, Ajay Singh Chautala (former MP and father of current Deputy Chief Minister of Haryana), and 53 others were charged in connection with the appointment of 3206 junior basic teachers in Haryana during 1999 and 2000. He and his father, Om Prakash Chautala (former Chief Minister of Haryana) was sentenced to 10 years imprisonment by a New Delhi court. The verdict was later upheld by Delhi High Court and the Supreme Court.

Reservation is a double-edged sword. It's good when applied in the right quantity for uplifting the scheduled tribes and those people who are at the bottom of the Indian social ladder and suffer just because they are born. However, providing reservations to groups, which forces the government hand for that by bringing the state to a standstill or providing it as a way to win elections has a long-term impact. Once provided, it’s not easy to take it back. 

Ironically, India is one of those rare countries where people fight for inclusion in the backward category. Bringing reservation to the private sector is not just immoral but criminal. They are already struggling under the Indian system which works extremely slow and where contract enforcement is a miracle. The state should do something for locals by generating jobs and opportunities; not by pushing people from other states away. Always remember, a huge number of companies operating in Haryana and providing jobs to locals are not from Haryana. Also, a lot of people from Haryana are working in other states and other countries. 

Sajeev

References

1. Haryana State Employment of Local Candidates Bill - PRS

Opening a wrap hole to North-Eastern India - New gateways at Chattogram and Mongla

Chattogram to Agartala

Carrying two TEUs of TMT steel bars (for Agartala in Tripura) and another two TEUs of pulses (for Karimganj in Assam) she left Kolkata port. The destination of this ship is a port in Bangladesh called Chattogram. This is the new transit point for Indian cargo, destined to North-Eastern India. From Chattogram, containers will be shifted to Bangladeshi trucks and will start her final leg of the journey to northeastern Indian cities like Agartala.

Transit trade will be very beneficial for both countries. Rest of India will get a shorter route to North Eastern Region. This landlocked area will get an opening to the sea for trade. This route not just cut down transit time but also reduce fuel cost, and retail price. After all, the end-customer needs to pay for all transportation costs. 

For Bangladesh, waterways will be dredged and port infrastructure will be upgraded. GoI will bear 80% of project costs. Transit trade will generate additional revenue and business opportunities. In addition to increased traffic at Bangladeshi ports, Bangladeshi vessels and trucks will be benefitted. 

Another good news is, under Inland Water Transit and Trade, five more ports in each country will be designated as Port of call. This is in addition to six existing ports. This work is already in progress, in selected stretches.

More trade often brings countries close together and create shared prosperity.

Sajeev

Getting Paid is the right of the Creator: Will new laws force Google and Facebook to do that?

It is the fundamental right of a creator to get paid for his/her product(s) and (or) service(s). Using that to generate revenue, and not sharing that revenue with the creator is nothing but theft of intellectual property. Not getting paid for quality work, not only deprive the creator of his livelihood but also reduce the motivation to do so. It is a loss for society in the long term.

The seriousness of this crime does not come down just because the product we discuss here are news articles. The fight against content aggregators and traffic drivers like Google, Facebook, etc. are going on for some time. The accusation is, they make revenue out of contents but fail to pay or share it with content generators.

Before the digital era came, media created their content and got paid in the form of ad revenue and user subscription fees. In the digital age, local news outlets have less control over the news they published online. They hardly have any wherewithal to bargain with transnational media behemoths like Google and Facebook. These two drove a lot of traffic to their sites; they also display snippets from these media organizations and use it to design their own products. In this deal, local media outlets lost everything. Let me remind you, it is often these local newspapers which stay close to people on the ground and report on community issues which affect the daily life of citizens. 

Recently the Australian government asked Facebook and Google to share revenue generated from news articles with traditional media. They must negotiate in good faith. If they refuse, there will be a binding arbitration process and penalties up to A$10 million (US$7 million) or 10% of local revenue.

It is not the first time; any government is asking them to do so. In April, France ordered Google to negotiate in good faith with local media firms and pay for what they use. Later a law was introduced last year to “transpose a pan-EU copyright reform that intended to extend publisher rights to news snippets”.

What google did? Instead of paying publishers for using their content, “they stopped displaying content that is covered by the law in local search and Google News”. Earlier Google found out workarounds in Spain and Germany. What will they do this time? Sooner or later law in similar lines will be passed in US congress. Why do not do the right thing now itself?

Sajeev

References

1. No more free rides: Australia orders Facebook, Google to share advertising revenue from news articles with media organizations- SCMP 

2. Making internet majors pay for news content they make money from - ET

UDAN is not flying high

An interesting government scheme in recent years which fascinated me is UDAN (Ude Desh Ka Aam Nagarik). Even for a casual observer, the objectives are very enthralling. 

First, it’s ambitious. Before the announcement I never knew that India had so many airports and airstrips. As a matter of fact, many airports - Ambikapur, Dimapur, Neyveli, Rourkela, Bokaro, Rupsi, Bareilly, Vellore, Shravasti etc - became operational after the announcement of routes.

Secondly, staggering number of air routes announced under this scheme – 688. If all these routes are operationalized, then mobility of Indian citizens might be one of the biggest in the world. 

Third, airline job will lose its fanfare and be like any other jobs. New pilot schools will come up; new air-crew schools may come up like nursing schools. Lot of new job openings will come - air flight controllers, maintenance engineers, ground staff etc. 

Fourth, India might see some companies churning out 18/24/48-seater aircrafts. Will SARAS get a new life? Don’t know. But there is a great chance that some Indian companies might take up small aircraft manufacturing or at least its assembly in India. 

Fifth, freights transportation time across India will reduce drastically. Apple from Srinagar Mandi might reach Kochi within hours; Kerala paratha and curry from Kannur will reach Tezpur for lunch. Does people know about Kerala paratha in Tezpur? I don’t know. But you got the point, right?

Sixth, boon for farmers. For e.g. Maharashtra is one of the biggest producer state and Kerala is one of the consumer states. Problem till now was how to transfer perishable items like onion, tomato from Nasik to Kozhikode quickly and ensure that, farmer is getting a larger share of revenue. Well, UDAAN is the answer for you.

Benefits are high. At the same time there were questions lingering on my mind.

Can we make these many airports operational and stay profitable or least make only marginal losses? 

Do we have enough capability to train enough manpower in short interval to operationalize UDAAN? 

From where new/old aircrafts will come? One can’t operate big jets on these routes and become profitable. On the other hand, buying aircrafts and building up associated infrastructure is a huge financial commitment (even if it is small). In an industry where only a couple of operators are profitable and saw winding down of numerous companies, who will make huge capital expenditure.

Will these routes make enough money to justify expenditure? How long Government of India – whose policies changes quickly, bureaucratic red tape with not so friendly tax regime - will underwrite the losses airlines are making in these routes? 

Will there be frequent cancellation of planes in these routes due to low passenger load factor; which in turn reduces the reliability of these services in travelers mind. 

Will government reduce sky high tax on ATF and other equipment and services on these routes? Even if Union government does it, will state governments follow it up? ATF, like petrol and diesel is not currently under GST and union government charges around 10+% on it. State government can charge whatever they want on ATF.

If freight traffic proved to be more profitable, then, will government promote freight over passengers? Its looks like a viable alternative; promoting freight solves another set of problems as well. However, it’s not glamourous. 

Will routes and time be wisely chosen? like current routes where railway tickets are always in regret; buses are always full?

Will these small planes get enough slots on major airports like Mumbai, Delhi, Bangalore, Hyderabad, Chennai, Kolkata etc at prime time? Getting slots are one of the costliest things in airline industry. Short regional routes might need busy morning and evening slots so that the passenger can reach a city in the morning, complete the work, and leave by evening. Coming and leaving the city at odd times may not be that interesting. In addition to that, regional traffic often peaks on weekends.  

After three years this may be the right time to answer some of those questions.

The idea of regional connectivity is not new; it came from P V Narasimha Rao’s days in 1994. Initial scheme was affecting the profitability of airlines and government decided to tweak it during UPA II. Report came on 2013 and UPA II didn’t get enough time to implement it. Modi administration took it and under his regime in 2017, April 17 first UDAAN flight was flown between Delhi and Shimla. 

Five airlines - SpiceJet, Alliance Air, TrueJet, Deccan Charters and Air Odisha – tried their luck in the first round (later joined by zoom airline in another round) where 128 routes were awarded (only 54 of them became operational).

Out of this Air Odisha has two aircraft (one of them a 20-year-old Beachcraft plane) and AirDeccan had 3 Beachcraft aircrafts. 

Government offered incentives like,

• Tax reduction on ATF
• Waiver on landing and parking charges.
• Significant reductions on route navigation charges
• Exclusive rights on the routes for 3 years (this clause was modified later) etc.
•  Viability Gap Funding for airlines to make up their losses (this fund comes via a levy of 7500 to 8500 on all departing domestic airlines, which of course will be passed on to passengers)

List looks good on paper. But the fate of AirOdisha, AirDeccan indicates that, this is not enough to boost regional connectivity. 

Extremely high operating expenditures and dangerously low passengers load factors resulted in the closure of small airlines. Interestingly for them, non-scheduled chartered services were more profitable then scheduled ones.

Only a fraction of announced routes were operationalized in all rounds.

UDAAN 1.0: 54/128
UDAAN 2.0: 106/297
UDAAN 3.0/3.1: 88/335
UDAAN 4.0: current avathar

It’s not same with all airlines and all routes; IndiGo seems to be doing good with routes allocated to Kannur Airport. In addition to that not all routes are not hopeless.

If government’s intention is to bring in new airlines, then it must investigate how small airlines with couple of planes can profitably operate on regional routes even if they lack the scale and other advantages big airlines. 

How to make Indian market attractable for small aircraft manufacturers to set up shop. Bring ATF under GST or make sure that states cut taxes on ATF; set up small exclusive runways for small aircrafts in major airports without affecting existing operations etc. Government should focus on selected number of small routes which are sustainable initially then expand; rather than doing everything at a time.

UDAAN already reached 4.0. It’s a time to take a break and analyze hits and misses. 

Sajeev

References
1.Business Standard

Better to Stay away from investing in ‘Mattala International’ Airport

Check-in Counters, Photo by Anuradha Dullewe Wijeyeratne

China’s One Belt One Road(OBOR) is one of the biggest infrastructure projects ever initiated by any country. Probably its only rival may be Marshall Plan for post-world war reconstruction of Western Europe. India is not comfortable with it, as OBOR also sets up transportation points (which may be used in future for military purpose as well) across Indian ocean. More importantly the USD 48bn CPEC corridor pass through Pak Occupied part of J & K (PoK).

It’s not that OBOR is a smooth success everywhere. It ran to trouble in Sri Lanka, where Chinese built seaport-airport complexes at Hambantota during the reign of Chinese friendly Rajapaksa regime. Discussions are also on for a refinery and investment zone. The main attraction of Hambantota is its closeness international shipping routes. China is running Hambantota seaport with a 99-year lease and proposing 6000 hectares investment zone. If realized, this will be the largest of such project in Sri Lanka.

Now India is proposing to invest in an international airport at Mattala near Hambantota. On paper, it looks like a good decision. After all, we are going to sit next to Chinese projects; getting a bigger footprint in Sri Lanka, from where India was practically out during the reign of Rajapaksa.

But on the ground, there are bigger problems. This international airport is also dubbed as the emptiest international airport in the world. Built almost nowhere, this project was opposed by a government agency in the beginning itself. Now hardly any flights come to this airport. Major visitors to this airport are wild animals. Approach road is already taken over by cattle. In 2016, 300+ soldiers, police officers were deployed to clear the airport from wild animals.

In addition to that, Rajapaksa wing is protesting against Indian control of Mattala airport. They call it as handing over national assets to India which is nothing but a big white elephant. In such a situation do we really need to invest, which is nothing but a wastage of money and other resources? Our desire to counter rising Chinese influence in the immediate neighborhood should not result in owning a white elephant.

Chinese outlay for OBOR is good. To an extent all Chinese investments are safe. Everything is in the form of loans to countries; not development assistance or grants. Interest rates are also not so low. All those countries at some point in the future will face difficulties in servicing the loan. Sri Lanka is already facing it. We can help Sri Lanka, and we should help; but not by investing in white elephants like Mattala airport.

Sajeev

Frequently Asked Questions on GST (Goods and Services Tax) - Part VII

FAQ on GST (Goods and Services Tax) - Part I
FAQ on GST (Goods and Services Tax) - Part II
FAQ on GST (Goods and Services Tax) - Part III
FAQ on GST (Goods and Services Tax) - Part IV
FAQ on GST (Goods and Services Tax) - Part V
FAQ on GST (Goods and Services Tax) - Part VI
FAQ on GST (Goods and Services Tax) - Part VII


This Question and Answers are prepared by Apex Training Institute Under Central Board of Excise and Customs(CBEC) with some inputs from National Academy of Customs, Excise and Narcotics (NACEN).

Below mentioned Q&A are derived from above document with modifications.



89. What is IGST?

“Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-State trade or commerce.

90. What are inter-state supplies?

A supply of goods and/or services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States, two different union territory or in a state and union territory Further import of goods and services, supplies to SEZ units or developer, or any supply that is not an intrastate supply. (Section 7 of the IGST Act).

91. How will the Inter-State supplies of Goods and Services be taxed under GST?

IGST shall be levied and collected by Centre on inter-state supplies. IGST would be broadly CGST plus SGST and shall be levied on all inter-State taxable supplies of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim the credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.

92. How will the settlement between Centre, exporting state and importing state be done?

There would be settlement of account between the Centre and the states on two counts,

• Centre and the exporting state: The exporting state shall pay the amount equal to the ITC of SGST used by the supplier in the exporting state to the Centre.
• Centre and the importing state: The Centre shall pay the amount equal to the ITC of IGST used by a dealer for payment of SGST on Intra- state supplies.

The settlement would be on a cumulative basis for a state taking into account the details furnished by all the dealer in the settlement period. Similar settlement of amount would also be undertaken between CGST and IGST account.

93. What treatment is given to supplies made to SEZ units or developer?

Supplies to SEZ units or developer shall be zero-rated in the same manner as done for the physical exports. Supplier shall have the option to make supplies to SEZ without payment of taxes and claim refunds of input taxes on such supplies (section 16 of the IGST Act).

94. The place of supply in relation to immovable property is the location of immovable property. Suppose a road is constructed from Delhi to Mumbai covering multiple states. What will be the place of supply?

Where the immovable property is located in more than one State, the supply of service shall be treated as made in each of the States in proportion to the value for services separately collected or determined, in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf.
(The Explanation clause to section 12(3) of the IGST Act, for domestic supplies)

95. What would be the place of supply of services provided for organising an event, say, IPL cricket series which is held in multiple states?

In the case of an event, if the recipient of service is registered, the place of supply of services for organising the event shall be the location of such person.

However, if the recipient is not registered, the place of supply shall be the place where the event is held. Since the event is being held in multiple states and a consolidated amount is charged for such services, the place of supply shall be taken as being in each state in proportion to the value of services so provided in each state.
(The Explanation clause to section 12(7) of the IGST Act)

96. What will be the place of supply of goods services by way of transportation of goods, including mail or courier?

In the case of domestic supply: If the recipient is registered, the location of such person shall be the place of supply.
However, if the recipient is not registered, the place of supply shall be the place where the goods are handed over for transportation
(section 12 of the IGST Act)

For international supplies: The place of supply of transport services, other than the courier services, shall be the destination of goods. For courier, the place of supply of services is where goods are handed over to the courier. However, if the courier services are performed even partially in India, the place of supply shall be deemed as India
(section 13(3),13(6) and 13(9) of the IGST Act).

97. What will be the place of supply of passenger transportation service, if a person travels from Mumbai to Delhi and back to Mumbai?

If the person is registered, the place of supply shall be the location of the recipient. If the person is not registered, the place of supply for the forward journey from Mumbai to Delhi shall be Mumbai, the place where he embarks.

However, for the return journey, the place of supply shall be Delhi as the return journey has to be treated as a separate journey.
(The Explanation clause to section 12(9) of the IGST Act)

98. What is GSTN?

Goods and Services Tax Network (GSTN) is a not-for-profit, a non-government company promoted jointly by the Central and State Governments, which will provide shared IT infrastructure and services to both central and state governments including taxpayers and other stakeholders. The Frontend services of Registration, Returns, Payments, etc. to all taxpayers will be provided by GSTN. It will be the interface between the government and the taxpayers.

99. What services will be rendered by GSTN?

GSTN will render the following services through the Common GST Portal:

(a) Registration (including existing taxpayer migration, a process which began on 8th Nov 2016);
(b) Payment management including payment Gateways and integration with banking systems;
(c) Return filing and processing;
(d) Taxpayer management, including account management, notifications, information, and status tracking;
(e) Tax authority account and ledger Management;
(f) Computation of settlement (including  IGST Settlement) between the Centre and States; Clearinghouse for IGST;
(g) Processing and reconciliation of GST on import and integration with EDI systems of Customs;
(h) MIS including need-based information and business intelligence;
(i) Maintenance of interfaces between the Common GST Portal and tax administration systems;
(j) Provide training to stakeholders;
(k) Provide Analytics and Business Intelligence to tax authorities; and
(l) Carry out research and study best practices.

Sajeev

For full set please visit
http://pibphoto.nic.in/documents/rlink/2017/apr/p201742502.pdf

Frequently Asked Questions on GST (Goods and Services Tax) - Part VI

FAQ on GST (Goods and Services Tax) - Part I
FAQ on GST (Goods and Services Tax) - Part II
FAQ on GST (Goods and Services Tax) - Part III
FAQ on GST (Goods and Services Tax) - Part IV
FAQ on GST (Goods and Services Tax) - Part V
FAQ on GST (Goods and Services Tax) - Part VI

FAQ on GST (Goods and Services Tax) - Part VII

This Question and Answers are prepared by Apex Training Institute Under Central Board of Excise and Customs(CBEC) with some inputs from National Academy of Customs, Excise and Narcotics (NACEN).

Below mentioned Q&A are derived from above document with modifications.


75. What is job work? 

Job work means undertaking any treatment or process by a person on goods belonging to another registered taxable person. The person who is treating or processing the goods belonging to other person is called ‘job worker’ and the person to whom the goods belong is called ‘principal’.

76. Can a principal send inputs and capital goods directly to the premises of job worker without bringing it to his premises? 

Yes, the principal is allowed to do so. The input tax credit of tax paid on inputs or capital goods can also be availed by the principal in such a scenario. The inputs or capital goods must be received back within one year or three years respectively failing which the original transaction would be treated as supply and the principal would be liable to pay tax accordingly.

77. Can the principal supply the goods directly from the premises of the job worker without bringing it back to his own premises? 

Yes. But the principal should have declared the premises of an unregistered job worker as his additional place of business. If the job worker is a registered person then goods can be supplied directly from the premises of the job worker.

78. What is input tax? 

Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST) or Union territory tax (UTGST) charged on the supply of goods or services or both made to a registered person. It also includes tax paid on a reverse charge basis and integrated tax goods and services tax charged on the import of goods. It does not include tax paid under composition levy

79. Can GST paid on reverse charge basis be considered as input tax? 

Yes. The definition of input tax includes the tax payable under the reverse charge.

80. What are the conditions necessary for obtaining ITC? 

Following four conditions are to be satisfied by the registered taxable person for obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both;
(c) the supplier has actually paid the tax charged in respect of the supply to the government, and
(d) he has furnished the return under section 39.

81. A person becomes liable to pay tax on 1st August 2017 and has obtained registration on 15th August 2017. Such person is eligible for input tax credit on inputs held in stock as on: 
1st August 2017 
31st July 2017 
15th August 2017 

He cannot take credit for the past period 31st July 2017

82. What is the purpose of returns? 

a) Mode for transfer of information to tax administration;
b) Compliance verification program of tax administration;
c) Finalisation of the tax liabilities of the taxpayer within stipulated period of limitation; to declare tax liability for a given period;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti-evasion programs of tax administration.

84. Who needs to file Return in GST regime? 

Every person registered under GST will have to file returns in some form or other.  A registered person will have to file returns either monthly (normal supplier) or quarterly basis (Supplier opting for composition scheme).

An ISD will have to file monthly returns showing details of credit distributed during the particular month.  A person required to deduct tax (TDS) and persons required to collect tax (TCS) will also have to file monthly returns showing the amount deducted/collected and other details as may be prescribed.

A non-resident taxable person will also have to file returns for the period of activity undertaken.

85. Whether all invoices will have to be uploaded? 

No.It depends on whether B2B or B2C plus whether Intra-state or Inter-state supplies.

For B2B supplies, all invoices, whether Intra-state or Inter- state supplies, will have to be uploaded. Why So? Because ITC will be taken by the recipients, invoice matching is required to be done.

In B2C supplies, uploading, in general, may not be required as the buyer will not be taking ITC. However still in order to implement the destination based principle, invoices of value more than Rs.2.5 lakhs in inter-state B2C supplies will have to be uploaded. For inter-state invoices below 2.5 lakhs and all intra-state invoices, state wise summary will be sufficient.

86. Whether the description of each item in the invoice will have to be uploaded? 

No. In fact, description will not have to be uploaded. Only HSN code in respect of the supply of goods and Accounting code in respect of the supply of services will have to be fed. The minimum number of digits that the filer will have to upload would depend on his turnover in the last year.

87. Is the scanned copy of invoices to be uploaded along with GSTR-1? 

Only certain prescribed fields of information from invoices need to be uploaded.

88. Who is the person responsible for making an assessment of taxes payable under the Act? 

Every person registered under the Act shall himself assess the tax payable by him for a tax period and after such assessment, he shall file the return required under section 39.

Sajeev