The government of Maharashtra is not keen on bringing real estate under the Goods and Service Tax (GST) regime, and has asked the GST council to take a decision after conducting an in-depth study including impact on the state finances, reports DNA.
State Finance Minister Sudhir Mungantiwar told the paper he had sent a letter to the Centre about two weeks ago. The GST Council meets next on November 9 when it may consider two rates — five percent and 12 percent for low-cost housing and other properties, respectively.
A senior state finance department official told the paper on conditions of anonymity that the state government is currently looking into the impact of the inclusion of real estate in GST.
“Similarly, the Centre and GST Council will have to conduct a study especially on its impact on state revenues. A final decision should be taken only thereafter,” the official said.
Currently, the under-construction of real estate projects is bracketed in the 19 percent GST slab.
Apart from lowering the GST rates, the Council will also look at the possibility of lowering the GST rate on real estate and subsume the cost of stamp duty and property registration, said the report.
“The state is yet to know whether or not the stamp duty and registration charges will be abolished and only GST will be applicable to the entire real estate sector. If both will be effective, then it may lead to a double taxation. The study should look into the prevailing GST regime in various countries before arriving at a conclusion,” the official added.
According to the state government data, it earns over Rs 20,000 crore through stamp duty and registration charges, annually.
The reduction in GST rates has raised concern among developers. Anand Gupta, a senior member of Builders Association of India said the government has issued a clarification that one-third of the current 18 percent GST will be treated as a deduction in lieu of land cost, which equals to 12 percent.
“The finance ministry should bring GST to 5 percent. It will work out to be 11 to 12 percent after payment of stamp duty and registration charges. I hope the GST at its meeting will take a call to subsume the cost of stamp duty or decide cut GST rate to 5 percent,” Gupta told the paper.
However, other real estate players like Niranjan Hiranandani, co-founder and managing director of Hiranandani Group believe that the inclusion of real estate in GST will ease the burden on customers as they will just have to pay a uniform tax to buy any property.
“The move will surely benefit consumers who will have to pay a single tax on the final product, which means all other additional tax & levies like stamp duty, registration, cess will be subsumed under new GST rate to be finalised. This will not only create positive sentiment but it could boost the actual sales,” Hiranandani told the paper.
Nevertheless, some analysts argue that the inclusion of entire real estate in GST will be a long process as it would require several changes in the existing GST Act as well as amendments to the Constitution.
Source : Money Control