Impact of GST on Construction Industry

Abstract

In its form of being a single indirect tax that covers all goods and services, the Goods and Services Tax (GST) may be termed as one of the most radical tax reform which is likely to have a long standing and a remarkable effect on the Indian economy. The GST, once fully implemented in two or three years' time is expected to eliminate the conflicting and cascading tax structures that are prevalent. There is a general ill-feeling that these conflicting tax structures have corifounded the entire industrial sector in the past. The GST may impact the construction industry in different terms. The construction material is likely to become dearer. Due to land prices being less, the affordable housing sector may become cheaper. However,the other sectoral components of the construction space like the real estate and commercial sectors are expected to get costlier. In a way high value realty may feel the pinch. As minimal change is only visualized in the overall gross cost of construction, hence the impact 011 real estate developers and builders may not be significant. The builders and developers can offiet the expected increase in the construction costs by virtue of input tax credits on various items homogeneously viz. GST collected on consultant's bill or that on a bag of cement. As regards to the infrastructure sector - Goods and services for infrastructure projects enjoy a large number of concessions and exemptions under Central and State laws, since the sector is of national importance. Yet, the multiplicity of taxes and general construct of contracts give the infrastructure sector a heightened degree of complexity from the perspective of indirect taxes. The key issue for this sector is the continuity of current concessions and exemptions under GST and its plausible impact 011 credit chains and costing. In this paper an attempt is made to elucidate the impact of GS Ton van·ous sectoral components of the construction space.