the Madurai Bench of the High Court has held that railway infrastructure works awarded by Rail Vikas Nigam Limited (RVNL) qualify for the concessional Goods and Services Tax (GST) rate of 12 percent.
The decision addresses growing concerns over tax uniformity in large-scale public works and could potentially ease the financial burden on contractors working on railway projects across the country.The case centred on GST levied for track doubling works executed between Vanchi Maniyachchi and Nagercoil under the Southern Railway zone. The scope of work extended across a comprehensive portfolio of railway infrastructure—construction of roadbeds, platforms, minor bridges, water and effluent treatment facilities, maintenance buildings, track laying, and installation of essential signalling, telecom, and electrical systems.
Tax authorities had earlier imposed an 18 percent GST rate on these contracts, arguing that RVNL, being a public sector undertaking, did not fall directly under the Ministry of Railways and hence could not benefit from the reduced rate. However, this interpretation was challenged by the executing contractors who cited Central Government GST notifications that categorically apply a 12 percent GST rate to works related to railways, including mono rail and metro rail construction.In his ruling, the presiding judge noted that the operational mandate of RVNL is inseparable from that of Indian Railways, and both function as integrated arms of the central government to expand rail transport infrastructure. The court also rejected a narrow interpretation of the term “railway” under the Indian Railways Act, 1989, affirming that RVNL’s infrastructure works are inherently railway-related and therefore eligible for the concessional GST.
The judgment not only underscores the importance of consistency in taxation policy for government-backed infrastructure projects but also provides critical clarification that could influence similar disputes across India. It comes at a time when the country is pushing for faster infrastructure delivery under its Gati Shakti masterplan and aims to increase the share of rail in freight and passenger transport as part of its low-carbon transition.
Infrastructure policy experts argue that a lower and clearly defined GST rate helps reduce project delays, streamline costs, and encourage private and international participation in public projects.
It also supports sustainability goals by accelerating rail infrastructure, which remains one of the most energy-efficient and low-emission modes of transport.
By removing ambiguity and reinforcing the functional unity of organisations like RVNL with Indian Railways, the ruling is seen as a step towards creating a more investor-friendly environment in the infrastructure domain, while preserving public interest and fiscal transparency.As India looks to modernise its railway network with greater emphasis on high-speed corridors, regional connectivity, and sustainable mobility, this verdict may serve as a policy precedent reinforcing tax justice for development-oriented public works.
Also Read : https://urbanacres.in/chenab-bridge-set-to-transform-rail-connectivity-across-kashmir-valley-soon/
Rail Infrastructure Contracts Win Legal Support
