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Home » RCMME » Logistics & Warehousing » Denying GST credit a bureaucratic ruse

Denying GST credit a bureaucratic ruse

By | December 29, 2016 9:33 am SHARE

Denying GST credit a bureaucratic ruse
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“GST can only work if everyone is allowed to take credit of any GST paid for any item or service,” writes Arvind Nanda, CEO & Founder Director, Interarch Building Products Pvt Ltd

  It is a very serious issue that Goods and Services Tax (GST) credit will be denied if the product being bought is an immovable property. It is apparent that this is a bureaucratic ruse to deny credit to manufacturers, warehousing and logistics industry and service industry. 

While it is just a clause in the GST draft Bill and most people assume it is only meant for real estate industry, it has actually nothing to do with real estate but a denial on a major capital expenditure made by a company.  In case of SME manufacturing companies, logistics and warehousing industry and Service Industry, the factories and buildings or warehouses are 50 to 90 per cent of the capital expenditure which is a much higher amount than the plant and machinery cost.

Denying credit to a user of GST credit is a travesty of the whole GST system. GST credit for anything in GST chain has to be available to any user who is further selling a goods or a service and paying GST on his sale product whether raw materials or capital expenditure.

If the GST credits are denied according to items chosen and while GST is required to be paid but not allowed for credit, this is neither acceptable in GST nor conducive to having a chain whereby cash money or under billing can be avoided. All users of buildings will be encouraged to do under billing if they know GST credit will not be available to them.

The reason for denying credit of GST on factories, warehouses etc.  to manufacturers and logistics and service providers is totally unclear. GST can only work if everyone is allowed to take credit of any GST paid for any item or service. There is no other way to have a GST. As it is liquor, petroleum etc. are out of GST, if construction industry, which is a very big current generator of cash economy and black money is also denied credit while being in the GST chain, it will make the whole GST exercise quite futile.

It is essential that all industry associations ensure this clause has no place in the final GST bill.  It is a clause which affects the manufacturers, logistic industry and service providers, and not real estate industry as is being portrayed. 

Authored by_
Arvind NandaCEO &
Founder Director
Interarch Building Products Pvt Ltd

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