October 24, 2017

 

The government has argued that a decision should be taken at the GST Council after an in-depth study and after weighing its impact on state finances.

The government of Maharashtra has opposed the inclusion of real estate in Goods and Services Tax and does not want any decision in this matter to be taken in a hurry. The government has argued that a decision should be taken at the GST Council after an in-depth study and after weighing its impact on state finances.

State Finance Minister Sudhir Mungantiwar told DNA he had sent a letter to the Centre on this. Currently, GST rate on under construction real estate projects stands at 18 per cent. GST Council, at its meeting slated for November 9, may consider two rates — five per cent and 12 per cent for low-cost housing and other properties respectively. This apart, the GST Council will also weigh option to lower the GST rate on real estate and subsume the cost of stamp duty and property registration. Some analysts argue that inclusion of entire real estate in GST will be a long drawn process as it may need several legislative changes in the GST Act and amendment to the Constitution.

A senior state finance department official, who did not want to be identified, said the state government is currently looking into the impact of the inclusion of real estate in GST. "Similarly, the Centre and GST Council will have to conduct a study especially on its impact on state revenues. A final decision should be taken only thereafter.''

The state government has cited that it annually earns over Rs 20,000 crore through stamp duty and registration charges.

"The state is yet to know whether or not the stamp duty and registration charges will be abolished and only GST will be applicable to the entire real estate sector. If both will be effective, then it may lead to a double taxation. The study should look into the prevailing GST regime in various countries before arriving at a conclusion,'' the official said.

Anand Gupta, a senior member of Builders Association of India said at present GST rate on under-construction real estate projects stands at 18 per cent. Subsequently, the government has issued a clarification that one-third of 18 per cent will be treated as a deduction in lieu of land cost. Effectively, it turns out to be 12 per cent, which has brought the real estate industry in some trouble. "The finance ministry should bring GST to 5 per cent. It will work out to be 11 to 12 per cent after payment of stamp duty and registration charges. I hope the GST at its meeting will take a call to subsume the cost of stamp duty or decide cut GST rate to 5 per cent,'' he noted.

However, Niranjan Hiranandani, co-founder and managing director of Hiranandani Group, said that the inclusion of real estate in GST will surely ease the burden on the consumer who will now have to pay just one uniform tax instead of multiple taxes paid for buying property. "The move will surely benefit consumers who will have to pay a single tax on the final product, which means all other additional tax & levies like stamp duty, registration, cess will be subsumed under new GST rate to be finalised. This will not only create positive sentiment but it could boost the actual sales,'' Hiranandani said.

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Source: dnaindia.com