GST: The Good Bad And Uncertain

Implementation of GST will affect various sectors differently. Grant Thornton offers a quick look at how some of them will fare if the proposed bill is passed in Parliament

If the real estate sector is brought within the ambit of GST, it will result in transparency and a possible reduction in tax evasion cases 

The proposed Goods and Services Tax (GST) aims to replace multiple state and central levies with a single tax. Since the central and state taxes are likely to be subsumed under GST, it may result in fungibility of tax credits across intra- and inter-state transactions. Consequently, different industries may need to conduct a cost-benefit analysis in terms of applicable input and output taxes.

REAL ESTATE

Transfer of (completed) properties may continue to be outside the purview of GST and be liable only to applicable stamp duties.

In case this sector is brought within the ambit of GST, it is likely to result in transparency, which will significantly reduce tax evasion through more efficient transaction-tracking methods, and improved enforcement and compliance. Since GST may be levied on a single value, the current issue of levying tax on tax (VAT on central excise duty) is likely to be removed.

At present, developers pay various non-creditable taxes on supplies. GST may replace these multiple taxes with a single tax; credit on supplies may also be available, thus reducing costs for all players.

However, if real estate output is exempted, then input GST credit could be a substantial cost for the sector, resulting in blockage of credit and higher costs to end consumers.

FINANCIAL SERVICES