New Delhi: The Goods and Services Tax (GST) Council will consider lowering the tax rate on under-construction properties next week, finance minister Piyush Goyal said. A ministerial panel has firmed up its recommendations in this respect, which will be placed before the federal indirect tax body.
Goyal said there have been extensive consultations and that a solution for giving tax relief on real estate projects will be arrived at soon.
A ministerial panel led by Gujarat deputy chief minister Nitin Patel has favoured lowering GST on under-construction properties to 5% without credit for taxes paid on raw materials, down from an effective 12% at present with tax credits. The seven-member panel also favoured slashing the rate on affordable housing from 8% to 3%.
Only under-construction properties attract GST. Completed ones are subject to stamp duty.
The proposed tax cut on under-construction properties follows several measures by the government in the interim budget FY2019-20 and by the Reserve Bank of India (RBI) last week aimed at giving relief to the middle class and home buyers. While the budget gave income tax relief to the middle class, the RBI slashed the rate at which it lends to banks by 25 basis points to 6.25%.
“A meeting of the GST Council meeting has been called. I hope the consensus arrived at by the GST Council committee will be agreeable to all of you. It will be beneficial to all of you," the minister said at an event organized by the Confederation of Real Estate Developers’ Association of India (Credai) here.
The minister also hinted that it may be possible that in some cases, the tax incidence applicable on projects may marginally go up. That is because of the withdrawal of credits for the taxes paid on raw materials which is adjusted against the final tax liability on the house transaction. Taxes for which credit is disallowed may get added to the price of the final product.
Goyal indicated that this possibility may be there only in limited, individual cases. “But I urge you to accept (the Council’s decision). It is also in your interest," Goyal said, explaining that this will spare them of fears of investigations on whether benefit of tax credits have been passed on to the consumers or not. “It is in the interest of the nation, and of your business," the minister said. Not passing on the benefit of tax credits to consumers amounts to profiteering. In sectors where no input tax credit is given, the question of not passing it on to consumers does not arise.