The panel met last week for the first time and unanimously favoured lowering GST on under-construction residential properties.
Even though a panel of state ministers are in favour of lowering GST on under-construction residential properties, there has been no consensus so far on whether they should give input tax credit to real estate developers.
The GST council last month had announced the formation of a Group of Ministers, under the chairmanship of Gujarat Deputy Chief Minister Nitin Patel, to analyse tax rates and issues and challenges faced by the real estate sector under the Goods and Services Tax (GST) regime.
The panel met last week for the first time and unanimously favoured lowering GST on under-construction residential properties. “The GoM favoured lowering GST rates on residential houses to 5 per cent without input tax credit and to 3 per cent for those under affordable housing,” an official said.
“Currently, GST is levied at 12 per cent with Input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale,” another official told this publication.
However sources added that there was no consensus yet on the issue of the input tax credit given extended to the developer. A few members also pointed out that developers hardly pass on Input Tax Credit to home buyers.
“There are still differences over the input tax credit to be given to developers. No consensus could be reached. The GoM will be preparing its recommendation report this week. There would be some clarity by then,” the official added.
The effective pre-GST tax incidence on such housing property was 15-18 per cent. GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. However, developers have been complaining that homebuyers were not picking up under-construction properties since they have to shell out more money under the GST, making it difficult for developers to sell such properties.
Even in earlier meetings over the issue, there had been complaints that builders were not passing on the ITC benefit to consumers by way of reduction in price of the property.
The GST Council had on January 10 decided to set up a GoM to look into ways to boost housing sector under the new tax system.
The ITC conundrum
- The GST council last month had announced the formation of a Group of Ministers, under the chairmanship of Gujarat Deputy Chief Minister Nitin Patel, to analyse tax rates on the real estate sector
- Despite demands from developers, sources say that there is no consensus yet on extending input tax credit to the developer
- Effective pre-GST tax incidence on such housing units was 15-18 per cent
- GST, however, is not currently levied on purchase of real estate for which completion certificate has already been issued at the time of sale
Source- New Indian Express.