The clearance of the Goods and services tax (GST) Bill in the Rajya Sabha is a laudable step that would remove cascading taxes and make India’s manufacturing sector more competitive. Being a destination-based, indirect tax aimed at bringing in more efficiency and rational taxes, GST could actually help to lower manufacturing / processing, logistics and distribution costs, which could further revitalize the manufacturing and associated sectors (warehousing and logistics) by making them more price competitive and boost the overall Indian economy.
This would definitely boost the PM’s ‘Make in India’ initiative and create more employment. The warehousing and logistics sector, which is essential to raise the competitiveness of India’s manufacturing sector, would be especially benefitted by the GST as it would bring about increased supply chain efficiencies. GST will ensure the abolition of various central, state and local taxes, enabling easier transfer of goods between states, which would give way to larger, centralized and advanced warehouses that would serve as hubs to service various states.
Further the bill would benefit the overall real estate sector by ensuring a uniform tax structure, thereby improving the tax compliance by the developers. The GST Bill would replace most indirect taxes that currently exist, with one tax, thereby ensuring an efficient taxation system. Under GST, developers would see lesser burden of tax on input items like cement, steel, etc., as tax credits would be available for set off at various stages. This can lead to lower construction costs for developers across all asset classes, which could likely be passed on to property buyers / occupiers.
However, the magnitude of impact of GST on the sector would hinge upon the final rate of GST decided by the government and more importantly on the actual implementation. The time frame for rolling out the GST will stay take some time and the initial period, maybe up to a year, will mainly be needed to take care of any problems that arise in implementation. Hence, actual benefits for final consumers / buyers and the overall positive impact on the economy may take longer to get manifested.”
