Passage of Bill likely to fuel consumption in economy and facilitate growth of industrial/warehousing space.
For achieving 10% growth, India’s domestic economy needs to attract added investor interest, including that of overseas funds. Increased levels of foreign investments would be welcome for the Government’s recently launched “Make in India” initiative as well.
To this end, the passage of the pending Goods and Service Tax (GST) Bill is of critical importance. More direction is sought from the Government on the GST Bill in the upcoming Budget session. In this connection, the Hon’ble Finance Minister has been optimistic of the Bill being passed in the next session of Parliament.
The Bill aims to create a single tax regime by doing away with multiple central and state level taxes such as the Central Excise Duty, Value Added Tax (VAT), Octroi, luxury tax, etc. Once implemented with a single taxation structure, GST will have positive effects on individual as well as industry taxation levels.
On the individual front, it will make products and services cheaper, because the cascading effect of multiple taxes from the levels of manufacturers and wholesalers that is ultimately borne by end-consumers will be avoided. This move may incentivize more consumption in the market from consumers, injecting overall economic growth including in the retail and logistics sectors.
From the point of view of the industrial and logistics real estate segment, a unified GST would allow industry players to surmount regulatory restrictions and focus on consolidation of industrial/warehousing space for maximum operational efficiencies.
Under the current regime wherein indirect taxes are levied by the Central as well as State Governments for the storage and transportation of goods, logistics and warehousing firms are forced to locate their facilities in regions to best accommodate multiple tax structures.
Players often end up paying higher rentals because industrial/warehousing locations with lower rental rates also pose various regulatory hindrances.
Once the Bill is implemented on ground, such industry players are likely to move towards consolidating their facilities according to their specific business needs, instead of being driven by regulatory concerns.
Along with the recently relaxed guidelines on Foreign Direct Investments (FDI), the likely passage of the GST Bill may prompt large scale foreign investments and sustainable growth of the country’s built environment, including warehousing and industrial space. The Government’s “Make in India” initiative also would receive a significant boost from this move.
By: Anshuman Magazine, CMD, CBRE South Asia