Real Estate Sector
The real estate sector has strong economic multiplier effects through backward and forward linkages. Construction is the second largest employment generator in the country after agriculture and accounts for a significant proportion of the GDP. Under the current indirect tax regime, the real estate industry has been embroiled in disputes due to ambiguity in provisions as well as multiple taxation. Sale of under construction property attracts multiple taxes under the current regime, leading to cascading of taxes and higher tax cost burden on house purchases. The GST is likely to result in transparency in the real estate sector, which will significantly reduce tax evasion through more efficient transaction-tracking methods, and improved enforcement and compliance.
Health Care Sector
One of the major concerns is the current inverted duty structure that adversely affects domestic manufacturers, cost of inputs being higher than output. This discourages investment in this industry. GST may either remove the inverted duty structure or allow refund of accumulated credit. GST is expected to have a positive effect on pharmaceutical sector since 8 different taxes are levied in the pharmaceutical industry at the moment. A consolidation of all these into one tax would ease doing business. GST will also result in operational efficiency by streamlining the supply chain which can alone add 2% to India’s pharmaceutical market size.
Banking and Financial Services
In India most of the banking and financial services are exposed to service tax, at the rate of 14.5%, while GST is expected to be 18% to 20%. Thus services are likely to be costlier. Due to GST, financial service providers may be required to adhere to compliance’s across multiple states instead of the current single, centralised registration compliance’s. As GST is a destination based tax, it might be a challenge to determine the destination of certain services. This may lead to difficulty in determining state GST, central GST or interstate GST on B2B and B2C transactions. Imposing GST on banking and financial services may become a challenge and India, if successful, will chart a new course, which could become a model for the rest of the world.
Travel, Tourism and Hospitality
India’s travel, tourism and hospitality industries have multiple taxes, levied by both the Centre and the states. It is expected that under GST, supplies of hotels and restaurants will be subjected to a single tax. However, it may also lead to increase in tax rates.
The education sector currently enjoys various tax exemptions and benefits; services provided by schools and colleges are either not taxed or are covered in the negative list. The situation is likely to continue even after the implementation of GST.