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Infrastructure and transportation such as road and railway sectors, should continue to be exempted under the Goods and Services Tax (GST) regime, as withdrawal of exemption on existing projects will have a negative impact on business revenues, industry body Assocham has suggested.
“Alternative options should be provided in GST, such as zero rating the contract value chain, in the event the current exemptions are withdrawn, so as to protect infrastructure projects from any additional tax burden,” the chamber said in a release.
Currently, the services provided to infrastructure project are exempted from service tax, and wherever service tax is levied, works contract abatement is available and in value added tax abatement is also available. The combined effective tax rate comes to 10 per cent to 12 per cent, it said.
The GST rate on works contract services, therefore, should be provided as 12 per cent instead of 18 per cent, as released by GST Council, Assocham said.
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