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The real estate sector (like many other sectors), is facing a multitude of issues that is preventing it from growing the way it should.
Despite India's housing shortage, increase in construction costs coupled with an acute fund crunch are acting like wing clippers for the sector. While perfect days are a business myth, the sector hopes to reduce construction cost by getting GST rules amended in its favour.
Ease GST To Promote Sector
Residential Real Estate
Construction costs are at an all time high today not only due to the steep costs of raw material but also due to higher GST rates levied without providing for any Input Tax Credit (ITC) to developers.
Input tax credit in GST eliminates the cascading effect of taxation which was witnessed in the previous regime. Barring developers from availing ITC goes against the very notion of GST and this must be reviewed.
The ask is that developers be given an option to choose between 12% GST rate with ITC (Assessment scheme) or 5% GST rate without ITC (Composition Scheme).
Commercial Real Estate
Operational commercial properties are strong economic drivers and job creators for the country but currently, renting/ leasing attracts GST at 18%. However, input tax credit for construction (including renovation, repair, alteration etc.) is disallowed, breaking the seamless credit chain GST should enable.
Input tax credit in GST eliminates the cascading effect of taxation which was witnessed in the previous regime. Barring developers from availing ITC goes against the very notion of GST and this must be reviewed.
The ask is that developers be given an option to choose between 12% GST rate with ITC (Assessment scheme) or 5% GST rate without ITC (Composition Scheme).
Operational commercial properties are strong economic drivers and job creators for the country but currently, renting/ leasing attracts GST at 18%. However, input tax credit for construction (including renovation, repair, alteration etc.) is disallowed, breaking the seamless credit chain GST should enable.
Contract Services are currently divided into two categories - 18% GST is applied on non-governmental works contract services and only 12% GST applies on a work contract supplied to the government, a local authority or a governmental authority.
This dual rate should be standardised at 12% irrespective of the agency being served by the contract.
GST on Cement
Cement is being charged with 28% GST, the same rate as many luxury goods today. This needs a downward revision immediately.
Who Bears The Extra Cost Now?
No brainer. The home buyer/ end user of course, meaning passing on cost benefits to the consumer is a sure shot way to improve demand for property.