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The real estate sector will now have to wait a little longer for the Goods and Services Tax (GST) benefits. The GST Council on Thursday failed to take a decision on the issue and decided to set up a Group of Ministers’ (GoM) panel to discuss it further.
The reaction of the industry to the decision was mixed.
“The real estate and its stakeholders will wait for the review panel to consider the issue. We hope it will be a positive recommendation and hope for quick implementation of the same,” said Niranjan Hiranandani, President, NAREDCO.
The GST rate on real estate sector was expected to come down. However the decision is now postponed as it has wide ramifications, said Parag Mehta, Partner, NA Shah Associates LLP.
Though there was much anticipation, the GST Council failed to deliver a final verdict on GST applicable on real estate, said Anuj Puri, Chairman, Anarock.
Amidst differences among the States over the lowering of GST rate on under-construction flats, a final decision could not be taken by the Council at its 32nd meeting here on Thursday. A seven-member GoM constituted to examine the proposal is expected to give its recommendation before the next GST Council meeting.
Abhishek Jain, Tax Partner, EY India, however, said, “While from an optics perspective, the lower rate on real estate without input credit may fare well among the buyers, the actual tax cost to a buyer may increase or decrease depending on the quantum of input GST credit available on procurements made by the developers; thus referring this issue to a GoM for further discussion seems correct”.
Abhishek A Rastogi, Partner, Khaitan and Co, said for affordable housing projects the rates should come down to 5 per cent instead of the existing 8 per cent with input tax credits (ITC) while normal housing projects will be comfortable paying tax at 8 per cent with credits. But existing rate of 12 per cent for normal housing projects is a bit too stiff and needs to be revised urgently to revive the sector.
At present, the normal rate of GST for the real estate sector is 18 per cent. However, the effective rate of GST payable on purchase of under-construction or commercial properties from a builder involving transfer of property in land or undivided share of land to the buyer is 12 per cent with full ITC.
Housing projects in the affordable segment such as Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of a State government, attract GST of 8 per cent.
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