Topic – Part of static series under the heading – Infrastructure
5) Discuss the impact of GST on infrastructure sector. Suggest measures to be taken by the government to boost growth in infrastructure sector in India.(250 words)
Key demand of the question
The question is quite straightforward in its demand. It expects us to discuss the pros and cons of GST on infrastructure sector and list out the steps taken by government to boost the sector
Directive word
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer
Introduction – mention that Infrastructure is the backbone of Indian economy with total infrastructure spending is expected to be about 10% of GDP.
Body
- Explain how would GST impact the infrastructure sector. Bring out the pros and cons
- Pros
- No more cascading burden of taxes
- Valuation of goods and services in works contracts would now be put to rest as works contracts would be regarded as supply of services.
- expected to enable a reduction in logistics cost by as much as 20 per cent to 30 per cent, as firms reconfigure their supply chains
- Cons
- Exemptions and concessions to infrastructure have been completely withdrawn. This could also lead to increased working capital requirements.
- Electricity being outside the purview of GST, power generation companies would continue to have indirect taxes as a significant cost factor.
- Measures taken by the govt to boost infrastructure sector such as Kelkar committee recommendations etc
Conclusion – Mention that India needs to develop a better regulatory mechanism, a rational pricing system, reform financial markets and strengthen dispute resolution mechanisms so that the private sector finds infrastructure projects economically feasible.