By Parveen Jain
Bringing in GST (goods and services tax) is going to be a positive development for the real estate sector. GST shall have a multi-edged positive impact on the realty sector, bringing in more transparency, abolishing multiple taxation system, and making the system more systematic and streamlined.
The potential impact of GST will be better for the economy and for real estate in particular as it will bring in more transparency and things shall become crystal clear as instead of many agencies there would be a single nodal agency which can make the whole process streamlined and properly methodical, which will attract more FDI.
By abolishment of multiple taxation system and levying a single consolidated tax, things shall be more clear and transparent with no scope of confusion and no tax to be paid at different stages at different times. Hence GST shall bring in more transparency to the real estate sector providing an audit trail for better control and monitoring of the sector. Under GST, the unified tax system shall also stop the side effects of multiple taxation at different stages which sometimes can result in inflated prices for end-users.
To understand in detail how GST is different than the earlier multiple taxation system, it can be seen that earlier there were three major taxes which were being levied like service tax, VAT and excise duty. Now GST is a single consolidated tax, replacing all the above taxes. Earlier there was no Input credit, but after GST, input credit shall be allowed to the contractor as well as the developer. Earlier the price being charged by the buyer was a consolidated figure inclusive of all taxes, but now the buyer would know the break-up of the total price figure which shall be the cost plus GST. This is how more transparency shall be brought in as the buyer shall now be aware of the actual cost and how much tax or GST is being levied upon that cost.
GST is one solution to simplify the problem of the existing complex tax structure subdivided by service tax and VAT at different stages. GST shall also lead to uniformity in procedures across the nation which has diverse practices in different states currently. Hence GST can be considered to be a positive development for the real estate sector in the times to come.
(The author is President, NAREDCO)