Pinning hopes on a lower tax slab of 12 per cent, the real estate industry is awaiting clarity on the GST regime, according to JLL India, a real estate consultancy firm.

Following the recent statements made by Finance Minister Arun Jaitley, Anuj Puri, Chairman and Country Head, JLL (Jones Lang Lasalle)-India, felt that the highest and lowest tax structure of 30 and 5 per cent respectively was unlikely, and chances are it could either be 12 or 18 per cent. However, 12 per cent would be ideal for the sector.

‘Lower rate beneficial’

A lower tax rate (of 12 per cent) will help reduce the cost of apartments and increase affordability for end-users. As a result, developers may see an uptick in sales in a slow market, he observed. However, a higher rate of 18 per cent could end up increasing the cost. The industry also sought clarity on whether credit for input tax would be allowed if the composition scheme has been availed of, by developers.

Only after these clarifications, the real estate industry will be able to understand the implications of the upcoming GST regime.

Expenses to reduce?

On the positive side, a reduction in the tax management expenses incurred by developers is likely and the compliance costs will also reduce.

The Budget had announced a zero-service-tax policy for developers constructing flats of less than 30 sq m in tier-I cities and less than 60 sq m in tier-II cities, with the intention of incentivising developers to create affordable housing. Whether similar benefits will continue remains to be seen.

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