Union Minister Arun Jaitley is likely to chair the 33rd meeting of
the GST (Goods and Services Tax) Council on February 20, which among
other things will consider slashing tax on under-construction flats.
The meeting could be the last one before the code of conduct for the general elections comes into
effect.
Jaitley, who has just returned from the US after treatment, is expected to resume work soon.
Meanwhile,
officials in the Finance Ministry said the agenda for February 20
meeting will include proposal to lower GST on under-construction flats
and affordable housing. A Group of States’ Finance Ministers (GoFMs) has
favoured lowering GST rates on residential houses to 5 per cent without
input tax credit and to 3 per cent for those under affordable housing.
Both the rates will be without input tax credit and one condition for 5
per cent is to source at least 80 per cent of materials from a
GST-registered supplier.
The proposal to lower the GST rate was
discussed in the 32nd meeting of the GST council, held on January 10. As
there was no consensus, the matter was referred to a GoFMs.
Three-tier structure
At
present, there is a three-tier structure for housing projects — there
is no GST on sale of complex/building and ready to move-in flats where
sale takes place after issue of completion certificate by the competent
authority. GST is applicable on sale of under-construction property or
ready-to-move-in flats where completion certificate has not been issued
at the time of sale. Card rate for such flats is 18 per cent, but
effective rate is 12 per cent after abatement of 33 per cent (cost of
land). And, in the affordable housing category the effective rate is 8
per cent. Both these rates are with full input tax credit (ITC).
To boost sentiment
Experts
feel that lower duty will boost the sentiment in real estate market.
Suresh Nandlal Rohira, Partner at Grant Thornton India LLP, said home
buyers will get their due benefits under GST with the decision of GoFMs
to recommend lower tax rate. “It is a welcome move as in most cases the
buyers always felt that the builders were not passing on the ITC
benefits to consumers under 12 per cent levy and the ultimate burden was
to be borne by the consumers. This will really change the sentiments
and may bring some boost in the real estate sector,” he said.
Another
issue likely to be taken up at the meeting is some relief for the
exporters. As of now, exporters get refund of basic Customs duty and no
compensation for other levies which makes it difficult for them to be
competitive. Now an effort is being made to provide duty-drawback kind
of scheme where benefits will be provided through e-wallet. Such a
mechanism will help exporters deal with the issue of working capital.