Aug 31 2016 | Industry View
INDUSTRY REACTION TO GST BILL
Vipin Sondhi, MD and CEO, JCB India Ltd
"The passage of GST in Rajya Sabha is a landmark reform. A critical milestone towards Free Trade within India. It will also give a massive push to Make in India especially MSMEs. The ease and cost of doing business will receive a fillip and the width of the tax base will be enhanced.”
Deepak Kapoor, President CREDAI
“The implementation of GST Bill will aid in broadening the coverage of tax base, infusing transparency and also removing the present unhealthy competition among different states. Once GST is implemented, the multiplicity of taxes which leads to ambiguity would be eliminated. We are optimistic that new GST rates if kept rational would bring down the property prices due to lower input costs and as a result demand is expected to grow in near future. However, exclusion of Stamp Duty charges from the GST is a setback as home buyers will have to pay stamp duty too other than GST. Still, the benefit may go to home buyers if lower rate of GST is levied. Also it is very important that GST be implemented at the same rate in all the states to bring in uniformity.”
Prashant Tiwari, Chairman, Prateek Group
“GST bill will definitely be a game changer for Real Estate Sector. GST Bill will follow a single tax regime eliminating all the other taxes reducing the overall cost of construction. Under GST bill various taxes on building materials would be merged into one giving direct benefit to the builders which would then be passed on to the end-buyers. Also, it will have a positive effect on the commercial properties as commercial real estate is facing a lot of heat due to lack of funds. GST could boost this property segment as well. We are expecting that GST would help in increasing the GDP growth which would eventually help real estate to flourish in long-term."
Sushant Mutreja, Chairman, Cosmic Group
“GST bill once implemented would boost transparency and standardization in real estate sector. Home buyers are supposed to pay service tax and VAT presently while purchasing properties. There are also taxes like excise duty, custom duty etc to be paid by the developer which is then added to the cost of properties. The proposed GST will replace these taxes with a single tax bringing down the cost of construction i.e. all the multiple taxes on procurement side would be replaced by GST. However, the actual impact of GST can only be seen when final rates are decided."
Zafar Akbar, Chairperson, Exalter Group
“Real Estate sector will be highly benefited with the passage of GST bill as it will be a solution to a sector full of complexes and concerns. The different indirect taxes would be amalgamated into one tax easing the process of taxation considerably both for developers as well as home buyers. It is anticipated that under the GST system, there would be an even flow of credit and current restrictions on construction related credits are expected to be removed as well. Commercial properties are going to get huge benefits with this move as no credit is available on construction of developing a commercial property.”
Prakash Chhabria, Executive Chairman, Finolex Industries
“Apart from simplifying the tax structure, reducing compliance cost and improving efficiencies in supply chain, GST implementation will help improve the competitive positioning of the organized sector and hasten the shift from unorganized to organized sector in the PVC pipes industry.”
Neha Hiranandani, Director, House of Hiranandani
“The passage of Goods and Services Tax (GST) Bill is the biggest indirect taxation reform in the country. It would be a harbinger of change for the real estate sector which is currently plagued with a myriad of indirect tax issues both at the centre and state level. We hope that the bill brings in a more comprehensive and uniform tax structure that will ensure greater transparency in the sector. The GST will enable a smooth and seamless distribution network in India which will lead to in-time delivery of building material across India.
One of the positives that might come from the bill is removal of restrictions on credit utilization that will strengthen the credit chain in the system. However, since GST will be applicable on the materials purchased by the developer to construct the project, it will have a direct impact on the total costing of the project. The bill treats construction activities as “work contracts” but is silent about guidelines on valuation of land and has kept the sector away from input tax credit. This could mean higher costs for the end consumer. Also, implementation of the bill will not subsume the stamp duty levied by the states, who may increase it from time to time to meet revenue targets thereby pushing costs higher for the buyer.
It will be important to see what the final rate of GST would be because if the rate is higher than the existing cumulative taxes, it will certainly be dampener as it will increase the final cost for buying an under construction flat and defeat the purpose of the bill. While the intentions are noble and correct we feel for the bill to be successful all states must implement it together and at the same rate, else it will be cumbersome and bring additional compliance on an already strained sector."
Rohit Gera, MD, Gera Developments and VP, CREDAI
“The passing of the GST related amendments is an extremely welcome step. This will help in terms of ease of doing business in the country. We hope that the final bill takes care of the home buyers and does not raise the cost of homes by raising the tax incidence on homes. Stamp duty will continue and there is already double taxation on this. The first time stamp duty is paid on land, then the flat buyers pay Stamp duty on the flat without any credit for the land payment. Without addressing the needs of home buyers the government's desire of housing for all will not be met.”