GST & its impact on Infrastructure

1. GOODS AND SERVICE TAX IN INDIA:
IMPACT ON INFRASTRUCTURE
SANGIT BANIK (16ID60R15)
M.TECH(1ST YEAR)
RCGSIDM, IITKGP

2. OBJECTIVE OF STUDY
 To understand the concepts of GST.
 To study the features of GST.
 To evaluate the opportunities and challenges of
GST.
 To study the impact of GST on Infrastructure
sectors.

3. WHAT IS GST?
 GST is an indirect tax which will help to merge all
the prevailing different taxes into a unified tax
system.
 GST is applicable on supply of goods and services.
 This tax is basically levied on final consumption.
 It is not an additional tax.
 As India is a federal republic GST would be
implemented concurrently by the central
government and by state governments as-
CGST & SGST.
 Cascading(Tax-on-tax) effect on taxes will be
removed with its implication.

4. GST WORLDWIDE
 First introduced in France in 1954.
 At Present, it has spread to about 150 countries.
Countries where GST is prevailing

5. GST RATES
 In India GST rate of 15-20% is proposed centrally.
 Worldwide GST rates of different countries:
0
5
10
15
20
25
30
GST Rates

6. CURRENT TAX STRUCTURE IN INDIA
Tax Structure
Direct Tax
Income Tax
Wealth Tax
Indirect Tax
Central Tax
Excise Service Tax Customs
State Tax
VAT
Entry Tax,
luxury tax,
Lottery Tax,
etc.

7. PROPOSED TAX STRUCTURE
• Central Excise
• Additional duties of
Custom (CVD)
• Service Tax
• Surcharges
CGST
• VAT/sales tax
• Entertainment Tax
• Luxury Tax
• Lottery Tax
• Entry Tax
• Purchase Tax
• Stamp Duty
• Goods and passenger Tax
• Tax on vehicle
• Banking.
SGST

8. FEATURE OF GST
 GST is applicable to all kinds of goods and services
except the exempted goods and services.
Exempted goods include
• Electricity
• Alcohol for human consumption
• Real Estate
• Petroleum products
 GST is imposed on import of goods and service into
the country.
 Export is exempted from GST.

9. GST COUNCIL
 To be made by President of India.
 To be chaired by Union Finance Minister.
 2/3rd members of council from states.
 1/3rd members from union.
 Decision is made when 3/4th of the present
members vote in support.
 Quorum for the council is 50%.
 Works as the authority to settle disputes.

10. OPPORTUNITIES
End of Multiplicity of Taxes
Simple One Point Single Tax
Structure
Minimizing Corruption
Tax-Free Export

11. CHALLENGES
Inflated Revenue
Neutral Rate
Compensation to
States
Setting of Threshold
Limit

12. CURRENT TAX SYSTEM ON INFRASTRUCTURE
 Infrastructure projects currently enjoy various
concessions and benefits from indirect tax
perspective.
 The rail and port industry and also the road
construction is exempted from tax on construction,
erection and commissioning of services.
 The materials used for construction are applicable
for VAT.
 Travelling by rail, the services are partially taxable
while in the case of ports it is fully taxable.

13. GST ON INFRASTRUCTURE
 Under the proposed GST regime, all the key
Indirect tax procedures would be subsumed into a
simple unified system.
 The infrastructure supply chain got a very close
evaluation under the current GST regime.
 The bill proposes the widening of the tax base with
a reduction in the concessions and exemptions.

14. REAL ESTATE
 Second largest employment generator in India contributing
about 7.8% India’s GDP.
 The construction activity/works has been categorized
under ‘supply of services’.
 Currently, the excise duty paid on purchase of steel,
cement and other materials is a cost for the contractor.
 With GST being paid on said materials will be available as
credit.
 Central sales tax, entry tax will be subsumed into GST.

15. POWER SECTOR
 Power Sector is out of GST regime.
 States can earn electricity duty levied on users
according to their convenience.
 Impact on Power plant as they will not be able to
input tax credits they paid as taxes on
• Consumption of Coal
• Expenditure for setting up Power plant
• Operation cost
• Maintenance cost

16. LOGISTIC SECTOR
 In the current taxation system, 2% standard rate of
CST is applicable on interstate commerce of goods
but not on supply of goods.
 To avoid this tax big companies build their
warehouses in different states.
 Small and medium companies find it difficult to
survive in the market.
 In the current GST regime, this tax dodging by big
companies through warehouse building will
depreciate.

17. IT SECTOR
 Put an end on the prevailing indirect tax debates
and disputes in this sector.
 ‘Service’ has been defined to include all the
intangible property
 Definition of ‘goods’ has been clarified to exclude all
the intangibles
 Rectification of the dual treatment of digital
downloads, licences, trademark etc as both ‘goods’
and ‘services’.

18. INFERENCES
 GST will bring transparency and efficiency in the
current multiplicity tax system in India
 In long run it will lead to more employment
opportunities, higher output and flourish GDP.
 Implication of GST will provide India a world-class
tax system.
 Native goods will be more competitive in
International market.
 GST will probably improve the tax collections and
enhance India’s economic development.
 GST has the potential to accelerate various
infrastructure sectors.