India is an evolving market and evolution has been a key driver for growth. The last decade has witnessed a huge surge in non-traditional businesses, largely dominated by domestic startups and international e-commerce giants. For new businesses and startups, it becomes impossible to navigate through various direct and indirect taxes.
Constant changes to taxes like Service Tax are making things more complicated. Apart from its current efforts to bring transparency into the country’s domestic economy, the government has been working towards bringing transparency into the real estate sector as well including commercial spaces. Several steps taken by the government in recent times - from the Real Estate Regulatory Act (RERA) and the Goods and Services Tax (GST), to Real Estate Investment Trusts (REITs) - have all been implemented for improving the ease of doing business in this sector, as well as for increasing investor confidence.
The spread of initiatives we have seen this year reflect the fact that the commercial spaces facing multiple challenges of direct & indirect factors are receiving attention it deserves from the government. And, the Goods and Services Tax (GST) has been India’s one such biggest structural reform in decades. The landmark regulation will remove a plethora of indirect taxes and establish India as a single unified market.
Whilst this new regulatory framework has been positioned as a consumer-friendly set of policies, much has been said on the precise impact of GST on India’s commercial establishments as well as real estate.
As far as implementation of the GST is concerned, the onus lies on the Centre and states to ensure a smooth transition to the goods and services tax, which is the biggest indirect tax reform to create a unified market. Malaysia, which introduced GST two years ago, educated businesses and customers, but that did not suffice.
India should be prepared better for the switch over to avoid any chaos. So, rules must be clear, and the tax administration well-equipped to handle GST. Ideally, the new levy should be rolled out three months after the publication of GST rules to make transition smooth for businesses.
A single indirect tax which covers all goods and services will, in the long run, increase tax collection by making it easier for retailers and several other businesses to comply and also moderate overall taxation levels. That said, it should be remembered that the favorable effects of this new taxation regime will become evident only within 2-3 years of its implementation.
GST is a game changing tax reform, if it delivers on its promises. Let us welcome the GST with a positive note as it has something for all stake holders. Single uniform tax across entire country will make transactions much smoother & clearer.
By: Mr. Mukesh Kumar, SVP, Infiniti Mall