'GST on leasing will make end product cost effective for consumer'

GST is the biggest reform that has been undertaken since the opening up of the Indian economy and is a positive step towards nation-building, said D.K. Vyas, CEO, Srei.

According to him, the new indirect tax regime will bring in transparency and facilitate seamless transactions.

"GST paves the way for the One Nation One Tax ideology. India having a federal democratic structure, states and Union Territories imposed indirect taxes, with certain additional Central levies. This led to a multiplicity of taxes and a cascading effect which resulted in tax on tax. This multiplicity of taxes has been a contributing factor for the fillip in inflation over a period of time. In order to curb such cascading effects, the amalgamation of taxes was eminent," he said.

As Vyas points out, GST on leasing harmonises input across all levels to make the end product cost effective to the consumer.

However, higher rates under GST leads to requirement of higher working capital, as at any point of time the input tax might not be fully absorbed against output tax liability. It also results in higher cash flow, which consequently increases the credit risk on the underlying transaction.

"Both of the above factors result in increasing the cost of leasing an equipment. In order to sustain the nascent leasing Industry in the infrastructure space, it is desirable that full input tax credit is allowed instead of providing a blanket restrictive clause," he said.

Commending the government for putting in place an IT backbone towards integrating all these set-ups into the single GST Network, Vyas pointed out that all data will be centralised with ready input-output norms and transactions will get tracked, thereby minimising chances of any tampering through mis-reporting (or under-reporting).

"Tracking of transactions will dissuade unaccounted cash transactions, thus acting as a strong deterrent for generation of black money. At this juncture, it is critical that the IT infrastructure remains robust to sustain the challenges raised by the administrative mechanism during the implementation of GST," he said.

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