New Delhi: Federal indirect tax body, the Goods and Services Tax (GST) Council, on Wednesday deferred a decision on lowering the tax rate on under-construction property to Sunday, finance minister Arun Jaitley, who chaired the meeting, said.
A meeting of the Council through video-conference was adjourned after some state ministers requested for a face-to-face meeting to take a call on the subject.
So far all decisions of the Council have been taken by consensus and continuing with that tradition, the Council will hold its 34th meeting on Sunday, where the proposal for a tax cut will be discussed, Jaitley said.
A ministerial panel led by Gujarat deputy chief minister Nitin Patel is in favour of lowering the GST rate on under-construction properties to 5% without credit for taxes paid on raw materials. The seven-member panel also favours lowering the rate on affordable housing from 8% to 3%.
The ministerial panel was set up in January to consider a scheme to boost the real estate sector, struggling with record inventories. At present, the effective rate of GST on under-construction properties is 12% after allowing for the cost of land, which is out of the purview of GST. Properties where construction has been completed attract stamp duty, not GST.
The move to lower the tax rate sharply with no input tax credit is aimed at giving relief to homebuyers, but it remains to be seen whether the Council will approve it without changes. The central government is keen to cut taxes on under-construction property as it may improve sentiment about the housing market and help the industry, grappling with unsold inventory. Real estate is a job creator especially for low or unskilled labour.
Also read: Opinion | Do we need composition scheme in GST for real estate?