The Goods and Services Tax (GST) will come into force from July 1 and the country is bracing for one of its biggest tax overhauls in history. GST will bring in a uniform indirect tax system by subsuming various central, state and local indirect taxes and levies. The rollout of the GST will mean that multiple indirect taxes levied by both the Centre and states will be done away except for customs duty. A dual Central and state GST will be applicable simultaneously on supply of goods and services within the state. In the case of interstate supply of goods and services, an integrated GST will apply. Barring Jammu and Kashmir, GST laws have been enacted by the Centre and all states.
The present indirect taxation system allows the Centre as well as states to charge different indirect taxes. The Centre can levy custom and excise duty as well as service tax. The states can charge value added tax (VAT), entry tax, entertainment tax, local body tax, stamp duty, land revenue tax etc.
GST is part of a One Nation, One Tax vision of the Modi-led government. The present structure of the tax prevents cascading effect, gives ease of compliance, uniform tax rates and structure, and lowers extra tax burden on customers (GST is essentially a destination tax).
Let’s take a look at what the experts have to say about GST and the impact of its rollout:
Anuj Puri, Chairman – ANAROCK Property Consultants Pvt. Ltd.
Impact on real estate buyers:
According to Puri, the real estate sector is in a for a positive sentiment boost, though the price won’t come down as a result of its rollout. The transparency of the law and input tax credits are takeaways for both buyers and developers.
“For the residential real estate sector, the implementation of GST will definitely be a positive sentiment booster among property buyers. A simple and transparent tax applied on the purchase price is the biggest take- away for property buyers. Under the GST regime, all under-construction properties will be charged at 12% (excluding stamp duty and registration charges). It will not apply to completed and ready-to-move-in projects. Developers too will find the GST regime much simpler to work with, with the benefit of input tax credit being an added advantage.”
Satya Prabhakar, Founder and CEO, Sulekha
GST impact on small and medium size businesses (SMBs)
The low tax rate for small and medium business owners could prove to be an innovative way to help them adapt to the new tax.
“GST is a game-changing move for millions of SMB’s, since thousands of them work in the unorganized sector. The Modi Government has proactively thought of innovative steps to help SMBs adapt to GST by proposing a low tax rate of just 0.5-2% if the business turnover is less than Rs 75 lakhs p.a. The new GST regime allows SMB customers to easily take input credit on multiple services and products consumed by them – and pass on the benefits to end-consumers.”
P Venkatesh, Director, Platforms and Solutions, Maveric Systems
Though the transition to GST is a monumental step forward for the government, Venkatesh feels that the GST Suvidha Providers (GSP) have not been able to effectively prove that they are fully equipped technically to handle the transition and raises questions on their technical compliance and confidence to handle the transition.
“The transition to GST is an important step in the revenue management side of the government. It impacts not only the central government, but the state governments as well. In line with such a step, the government has put in a structure that can handle teething transition issues as well as ensuring compliance with the schemes through the approval of GST Suvidha Providers (GSP).
“We would not be surprised that they [GSPs] are neither fully equipped technically nor are they confident about handling the transition. Do we still go ahead with the roll out? If priority be given to quality in this implementation, then obviously no is the answer. If our opinion is sought, it would be for quality and therefore extending the time for the implementation would be the preferred choice.”
Mr. Irfan Razack – CMD, Prestige Group
According to Razack, initial days of implementation of GST with the recently implemented RERA may be confusing for customers as well as developers. However, things will stabilise after a few month.
“The rate of tax fixed for Real Estate is at 12%. Unfortunately, this figure includes land costs as well. Which means that henceforth, the consumer will have to pay the GST not only for construction but also for land – (Land was excluded from VAT and Service Tax earlier). He will also have to bear the additional burden of stamp duty. From a consumer standpoint, it’s tough to decide at this point whether realty prices will increase or decrease post the GST rollout. Only time will tell… Generally speaking, if the input costs go up, prices will go up. If the input costs go down, prices naturally will get corrected. Currently, looking at the various external factors, it’s difficult to predict anything concrete. In my opinion, for the moment, we should maintain the view that things will remain neutral.”
Akta Adani- founder of India Boulevard
Adani feels that a single tax rate is a boon for small business as compliance and tracking of taxes will be easier for international businesses. She says GST helps better predict expenses and creates a perception of a unified market of India to people outside India.
“As a small business, GST is a big asset since it is a single rate of tax applied. Especially as India Boulevard has global customers, we need to keep track of state taxes, customs duties of respective countries and also keep up with the notorious Indian tax system. The introduction of GST alleviates a big part of that and helps manage and predict expenses as a business better and allows smaller businesses to focus on growing the company. As an entrepreneur operating in India and outside of India, it creates the perception of a unified market focused on value creation,” Adani said.