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 a proposal to lower GST on under-construction flats and affordable housing. A Group of States’ Finance Ministers (GoFMs) has favored lowering GST rates on residential houses to 5 percent without input tax credit and to 3 percent for those under affordable housing. Both the rates will be without input tax credit and one condition for 5 percent is to source at least 80 percent 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.
At present, there is a three-tier structure for housing projects — there is no GST on the sale of a complex/building and ready to move-in flats where a sale takes place after an 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 percent, but the effective rate is 12 percent after abatement of 33 percent (cost of land). And, in the affordable housing category, the effective rate is 8 percent. Both these rates are with a full input tax credit (ITC).
To boost sentiment
Experts feel that lower duty will boost the sentiment in the 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 percent 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 a 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.
Source: The Hindu Business line.