Indian independent and professional investment information and credit rating agency (ICRA) prescribed that despite attracting the higher tax slab of 18%, construction sector is likely to avail benefit from the availability of input tax credit under Goods and Services Tax. GST will come into force July 1, onwards after a long wait of 10 years of its introduction.
In an official statement ICRA declared, “Under the current tax regime the benefit of input tax paid is not fully available, the benefits arising out of input tax credit on the raw materials available under GST regime would result in an overall neutral tax incidence for the construction services.”
GST rates might increase cost of the properties for infrastructure projects under implementation if there is poor built in crisis and the limited scopes for re-agreement of the contracts, as per ICRA.
For the payment of input taxes under GST regime there is credit availability which can counter-balance the higher GST rates. Id the contractor acknowledges the benefit of higher input tax credit, the higher GST rates should be reduced the effect. Most of the construction contracts fall under Taxability of Work contracts, which in extending along supply of services and supply of materials.
Construction companies have been levied 6% tax rate under the GST regime, assuming 40% services part of the contract. Again the value added tax (VAT) is applicable on the supply of the goods portion of the contract varies among the states ranging from 1-15%. Infrastructural developments such as roads, dams, irrigation will also be free from existing service tax list.
GST aims at single tax restoration throughout the country. It will accumulate multiple taxability under a single one. Only stamp duty is the only state tax that will operative even after GST implementation. Thought CREDAI, the apex body of private real estate developers’ association has urged the states to bring the stamp duty under nil rates. The taxes will be levied at a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower tax rates for essential items and highest will be levied on luxury items and de-merits products available in current market.
“The prime benefit of GST is there will be single tax rate to be paid on same product in any part of the country. This means industry will have lesser compliance compared with the exiting tax rules. The total taxation of most of the commodities is likely to go off. There will be availability of seamless flow of credit across the value chain under this new regime. GST will benefit the consumers immensely,-said Mr. Mahesh Somani.
Speaking about real estate Mr. Mahesh Somani mentioned, “Speculations suggest that cost of the properties might increase a little, where as maintenance charge will attract straightway 18% tax slab. But it’s expected that the immovable property transaction and low budget flats in Kolkata as well as the affordable housing sector would continue outside the purview of GST. However, GST is indeed an easier solution of tax riddle of Indian economy, added Somani.
- Somani Realtors News Network