Finance panel for realty, rail sectors under GST ambit

Addressing the Ficci National Executive Committee Meeting and later briefing reporters here, he justified expanding the GST envelope to the realty and rail sectors stating that broader the tax base, lower will be GST rate.

Stating that the 2003 FRBM Task Force Report had mooted the idea of taxation of real estate, he said, while construction sector is a significant contributor to national economy, housing expediture dominates personal consumption expenditure. 

According to him the present piece meal taxation of the sector only encouraged perverse incentives. Elucidating, he said, while raw material is charged Cenvat, works contract is charged VAT and stamp duty levied on the sale. With no provision of input tax credit in place, he said, there is little incentive to record such transations either at construction stage or at the sale stage at their correct value. This, he observed, led to substational loss of tax revenue and fuelled parallel (black market) economy.

Curb parallel economy
By bringing the real estate sector under the umbrella of GST, he said the country could launch a major attack on the parallel economy. Likewise, Kelkar also said it was possible to expand GST tax base with the inclusion of rail sector.

This will bring in level playing field provided to road and aviation sectors which are subject to the tax. Further, inclusion of rail sector under GST, he said, would also ensure that all inter-state transportation of goods can be tracked through proposed IT network, while railways could benefit by availing input tax credit on the significant purchased made by them.

He said, according to a NCAER study, implementation of GST would result in a GDP growth of 2-2.5 per cent and increase in exports between 10-14 per cent. Further, he noted, for GST to be effective and flawless, there should be identical GST laws across States as well as the Centre. Likewise, the methodology relating to levy, assessment, collection and appropriations of GST should be similar across States and the Centre, he added.