The Hindu Business Line : Real estate developers flay Kerala Budget

The Confederation of Real Estate Developers’ Associations of India (CREDAI) said in a statement here on Saturday that as per the budget proposals, the VAT compounding rate for contractors having no registration under central sales tax (CST) would go up to three per cent from two per cent as of now, while the rate for those with CST registration would double to eight per cent from the existing four per cent.

The rates will further increase to 3.03 per cent and 8.08 per cent, respectively, when the one per cent cess proposed in the budget is also taken into account. Since some of the materials for construction have necessarily to be brought in from outside the State, the contractors will have to pay up 8.08 per cent compounded VAT.

The higher rate now proposed will result in an additional VAT burden of Rs. 80-150 per square foot. At the same time, the construction sector has been struggling in the wake of the recent increase in the prices of construction materials like steel and cement.

The price of steel, for one, had gone up by Rs. 13,000 per tonne within the last couple of months, leading to an increase in cost by Rs.60 to Rs. 100 per square foot, the federation said. In all, the Government is levying Rs. 550 to Rs. 900 per square foot under various heads like stamp duty, VAT on construction materials, VAT on contract work, constructions workers’ welfare cess and other licence fees. In other words, if one constructs or buys a house worth Rs. 25 lakh, he or she has to pay Rs. 7 lakh to the Government under these heads.

Again, if the entire amount is taken as loan from financial institutions, the customer will end up paying Rs. 14 lakh as these levies and the interest thereon.

In the neighbouring states, the liability of the customer is only one-third of what is obtaining in Kerala.

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