A group of ministers (GoM) headed by headed by Gujarat Deputy CM Nitinbhai Patel has recommended 5 percent goods and services tax (GST) for under construction properties and 3 percent GST for affordable housing sector without input tax credit, said sources familiar with the matter.
Currently, GST is levied at 12 percent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.
Prashant Thakur of Anarock Property Consultants; MR Jaishankar, CMD, Brigade Enterprises; Pratik Jain, leader-indirect tax, PwC India and MS Mani, partner-GST, Deloitte India, shared their views and readings on the recommendation.
Thakur said this will be a positive move for the realty sector which is seeing stagnation in the sale.
“Looking at the huge amount of under construction projects that we have right now, this would be a great move and we will see a good amount of traction happening,” Thakur said.
Talking from developers’ perspective, Jaishankar said, “Whatever we developers have calculated, if the input tax credit is not given, 5 percent will have a cost-push effect to the extent of 2 percent or so.”
“In the case of affordable housing, if a composite tax of 3 percent without the input tax credit, it maybe cost neutral. So based on our calculation by eliminating input credit there will be a cost-push effect of at least 2 percent,” he said.
According to Pratik Jain, it’s never a good idea to restrict input credit for any sector and more so for real estate.