What are the implications of increased GST on Smart Cities?

GST is now the talk of the smart town. In the initial five years of the Smart Cities Mission, 12 per cent GST was applicable on certain construction projects, especially government buildings. However, for projects such as solid waste management, for instance, GST was not applicable. But after a recent reviewby the GST Council, the tax has witnessed an increase from 12 per cent to 18 per cent.

What happens when smart cities are considered companies and not municipal corporations or government entities? And how does the GST of 18 per cent impact suppliers and service providers who are providing support to these cities?
Trimbak Dhengale Patil, CEO, Solapur Smart City, says “It would be beneficial if GST is not applicable to projects under the Smart Cities Mission so that the tax amount can be allocated to its potential. Currently, as we pay the Government back the moneyit has provided us, the amount is just going around in circles. Additionally, instead of questioning if it should go from 12 per cent to 18 per cent, I believe it should just be zero.”

Meanwhile, Sandeep Malvi, CEO, Thane Smart City, shares that this increase will hamper the project cost as all the estimates have been drawn considering the 12 per cent GST. “However, as it is a government decision, we have to follow the rules.”