GST Council Forms Panel To Aid Real Estate Sector
The GST Council has notified formation of a ministerial panel which will study problems plaguing the real estate sector under the indirect tax regime and suggest remedial measures.
The panel will be headed by Gujarat Deputy Chief Minister Nitin Patel and will have Maharashtra Finance Minister Sudhir Mungantiwar and Karnataka Finance Minister Krishna Byre Gowda as its members, according to a statement by Ministry of Finance. Other members include the finance ministers of Kerala, Punjab and Uttar Pradesh—TM Thomas Isaac, Manpreet Singh Badal and Rajesh Agarwal, respectively—and Goa Panchayat Minister Mauvin Godinho.
A raft of measures over the past two years— a housing law that protects the interests of buyers, demonetisation, the goods and services tax and crackdown on benami property (or property held via proxy)—resulted in a temporary slowdown in the real estate sector. These measures were aimed at hobbling the shadow economy and widening the tax net.
The council, in its meeting on Jan. 10, had suggested setting up of a panel to boost the residential segment of the real-estate sector.
The terms of reference of the panel include:
- Studying GST rates and problems the residential segment faces under the new indirect tax regime.
- Suggesting a scheme for the sector like the composition scheme—where taxpayers can pay a flat GST rate without the option of availing credit on inputs—for traders.
- Examining GST on transfer of development rights and development rights in a joint development agreement.
- Examining legality of inclusion or exclusion of land in composition scheme and suggest valuation mechanism. Currently, purchase or sale of land doesn’t attract GST.
At present, GST on under-construction properties is 12 percent, while affordable housing projects attract 8 percent GST with the facility for builders to avail credit on inputs. Ready-to-move in properties don’t attract GST.
A composition scheme without the facility to avail input tax credit may not work well, especially for the low-cost housing segment, as it may entail increase in GST cost for builders as compared with the current arrangement, said Abhishek Jain, an indirect tax partner at EY India.
The statement didn’t stipulate deadline for the panel to submit its recommendations.
The real estate sector has faced a set of challenges under GST, which the tax hasn’t been able to alleviate, said Mahesh Jaising, partner at Deloitte India. Primary advantage of GST, which was full credit on taxes on all procurements on goods and services hasn’t fully helped the sector, he said.
The real estate sector is hopeful that the panel will address its concerns with specific focus on reduction of GST rate from 12 percent and with introduction of an expected composite rate of GST, as was prevalent under the erstwhile regime, Jaising said.