The equipment in question is the engine-booster turbochargers that attracted lower GST of 5 percent instead of applicable 28 percent
The Directorate of Goods and Services Tax (GST) Intelligence that investigates indirect tax evasions has accused power and automation technology company ABB India of evading GST by misclassifying equipment.
ABB allegedly misclassified turbochargers it supplied to the Railways and used to boost engine efficiency to make it eligible for a lower GST rate of 5 percent instead of the actual applicable 28 percent.
The investigating agency found a total evasion of around Rs 7.53 crore between July 1, 2017, and December 31, 2018.
ABB has paid Rs 1.94 crore under the 5 percent slab, and as per the probe body’s calculations, the company has pending tax liability of Rs 5.58 crore with an added penalty of an equal amount under Section 74(1) of the CGST Act.
The turbochargers that are used in railways, were to be classified under Chapter 84 of the act which would have levied a 28 percent from July 1, 2017, to November 14, 2017, and 18 percent GST tariff on the equipment after that. Instead, its inclusion in Chapter 86 when it was sold to A.P. Earth Movers and Indian railways attracted a lower rate, the report pointed out.
The Directorate found this was a deliberate misclassification “with a mala fide intention” to evade tax. The company was also allegedly suppressing facts about taxable supply between July 2017 to December 2018 to evade levy on inter-state transactions under Integrated Goods and Service Tax (IGST).
Responding to a query by BQ, the company called the matter ‘routine and not unusual for corporates in India’. The company will contest the claims with legal advice, it said, adding, “ABB is a law-abiding company and would respond to demands of authorities appropriately fully protecting the company’s interest.”
In its response to the tax authorities, the company noted that turbochargers are only used in locomotives and Chapter 86 covers “parts of locomotives” that are charged at 5 percent.
However, the probe finds ABB in violation of several sections of the act that includes the wrong classification of goods, furnishing incorrect details of supplies, incorrect tax assessment, and payment.Some experts believe there is some bit of ambiguity on the equipment classification as it is used in both industrial pieces of machinery. Some others though call this a clear case of evasion.