Jul 1 2017 | India Opportunities
Industry Reaction to GST
Shishir Baijal, Chairman & Managing Director, Knight Frank India
“The much awaited roll out of the Goods and Services Tax (GST) would be the single largest tax reform post-independence. Much like the initial heartburns caused by demonetisation it would trigger some momentary disturbances but augur well for the industry in the long term. Among the various economic policies of the Narendra Modi-led government, this will be one of the most important milestones. So, it is a welcome move.
GST would be extremely beneficial for the logistics sector. With a wave of new infrastructure taking shape in the forms of ports, roads and rail networks, the new tax regime would draw massive investments which would potentially transform the look and feel of the warehousing industry.
The impact of GST on real estate would be primarily tax neutral but loaded with gains for the affordable housing sector. The Finance Ministry has made it very clear that there should be no additional tax burden on consumers. Developers who did not get the benefit of ITC (Input Tax Credit) in the pre-GST era will now be able to avail it. Both in case of under construction projects and new projects buyers are entitled to full ITC. It would also add another strategic push to affordable housing which in turn will drive the recovery of the residential sector.
The intention of GST is to bring in efficiency in the entire tax system, the implementation of which will see lot of teething issues. But eventually it will pave the way for an extremely efficient tax system for the country.”
Anuj Puri, Chairman, ANAROCK Property Consultants Pvt. Ltd.
“To say the least, the Indian real estate sector has been going through significant transform in the recent times. The recently implemented Real Estate and Regulation Act (RERA) has already started addressing the issue of non-transparency and affixes a level of accountability on real estate builders and brokers which is unprecedented in the history of the Indian property sector.
For the residential real estate sector, the implementation of GST will definitely be a positive sentiment booster among property buyers. GST may not be instrumental in bringing down the prices of residential real estate over the short term. However, it will benefit all the stakeholders of the residential real estate sector, as the perception of the sector will improve on the back of a simplified tax structure and accountability being fixed at every stage”.
Rohit Gera, Managing Director, Gera Developments & VP, CREDAI - Pune Metro
“In the new GST Regime, the tax on under construction projects would be 12%. On the face of it this is an increase of 6.5% in terms of the tax payable by flat purchasers; however there is the option of getting full input set off credit on all input side if GST paid. It is expected that the net effect of the credit set off benefit will leave the overall tax revenue to the government as neutral, however the entire concept of GST is that the final consumer bears the overall tax and therefore the tax rate to the end consumer is much higher. This is therefore likely to lead to a reduction in the rate per square foot quoted by developers (since they will be able to get the benefit of the input tax credit) however the total cost to the end consumer may change slightly depending on the actual specifications, location and other details of the project. GST however is not applicable on ready properties and as a result, developers will either have to bear the burden of the tax since it cannot be passed on to the end consumer or the rates of apartments that are ready to occupy will increase to the extent of the taxes. Again, this will lead to a change in the quoted price by the developer but overall cost to the end customer will stay largely unchanged.”