Tax on cement should be brought down

Under the GST regime, infrastructure development project costs are likely to substantially come down, says Dr Shailendra Chouksey, Whole-Time Director, JK Lakshmi Cement.

How should Corporate India gear up to cope with the new GST regime?
GST is likely to be introduced from April 1, 2017. Implementation of GST would have huge impact on Corporate India, including the infrastructure industry.
The impact assessment is dependent on various factors inter alia rate of tax, threshold limits, etc., which are yet to be decided and put in the public domain. Even though the exact details of the new GST rules are not available, but before they are put in the public domain, Corporate India, to my best of knowledge, is working on making alterations in their ERP systems and also bringing about a sensitisation amongst all the stakeholders in their respective businesses for a smooth transition to the new system.

Could you identify the pain areas that still need resolution before the new GST regime comes into force?
Though various industry Chambers have made suggestions on different aspects of the Model GST Law provisions released in June 2016, one of the biggest challenges likely to be faced by the industry is with regard to not getting credit of the GST paid on previous purchases/inputs on account of mismatch in the figures appearing in the outward/inward returns, as the onus will be on the sellers to the ultimate consumers, that the entire value chain involved in the transaction is also GST compliant. Though it is a pain area, I think it is a necessary pain that a corporate will have to undergo whenever a major change takes place in the taxation system.

There are certain other uncertainties which can become pain areas if not addressed appropriately by the GST Council. For example, Corporate India has made huge investments with the assurance from Central and state governments in many states for continuity of excise/VAT exemptions for a pre-committed period. Based on the documents which are in the public domain, there is no answer to the fate of these exemptions which is a matter of concern to Corporate India, which may have many residual years for completion of this period.

Another pain area would be the exclusion of certain duties and levies which are not in the ambit of GST, like electricity duty, royalty, etc. Keeping them out of GST can increase the input costs for power-consuming and mineral-based industries, especially like the core commodity, cement.

Does the GST regime portend well for infrastructure development in India? How would the new tax regime reduce cost of production (by eliminating the cascading nature of taxes) in India?
Inputs for infrastructure development are presently being taxed at a rate which is much higher than the rate at which such goods are likely to be taxed under the GST regime which could be in the range of 20-22 per cent. Therefore, under the GST regime, infrastructure development project costs are likely to get substantially reduced because of rates of inputs, besides a favourable effect pursuant to removal of cascading affect of the entire value change.

Concerns have been expressed about the service tax component of the GST regime, with people saying it would be bad for industry. Is this assessment correct?
Till such time exact rules and rates are announced, this concern is justified. Revenue from service tax is presently almost around 60 per cent of the total revenue and the rate of service tax is 15 per cent (including cess), which may increase to about 20 per cent. Therefore, this proposal may not be good for the service industry.

Further, it is a matter of great concern to the service tax sector because of increase in compliance cost, in view of obligation to register in all the states where services are being provided as against the facility of Central registration presently available.

Kindly share any other data that you find relevant to the domain, since you are a specialist in the infrastructure sector.
Cement is a highly taxed commodity. In fact, it is one of the highest taxed in the world on a core input like cement. It is a good opportunity if this anomaly is removed by shifting cement as a luxury item to an essential core input for development of the economy. It would be a great boost to the infrastructure development in the country if the tax on this commodity can be brought down in the category of silver and gold, at about 4 per cent.
In fact, cement is taxed much higher than even a similar category product like steel. In fact, if the tax on cement is also brought under the same bracket of steel, it can not only bring equality and rationality in the taxation of similar products, it can also boost cement consumption, thereby boosting the infrastructure development in the country.