The GST Council headed by Finance minister Arun Jaitley will hold its 33rd meeting today. As indicated by interim finance minister Piyush Goyal in the interim Budget 2019, the GST Council may slash GST on under-construction houses to 5% and on affordable houses to 3% from the existing 12% and 8% respectively.
Worth mentioning here is that in its previous meeting, the council had formed a group of ministers under the chairmanship of Gujarat deputy CM Nitin Patel to decide on GST rates on under-construction houses. According to a report in the Times of India, the panel has submitted its report suggesting a reduction in the levy.
The reduction of GST rates on under-construction houses is likely to come with the removal of the input tax credit (ITC), which realtors believe will push up prices of these properties. It will, however, result in a reduction in the price of super premium houses of over 10,000 per sq ft where the existing effective rates go up to 10%. The tax on these properties under the new regime will come down to 5% leading to a reduction in the prices, the ToI report said.
The proposal to remove ITC came following complaints that builders are not passing on the ITC benefit to consumers by way of reduction in the price of the property after the rollout of GST. Following these complaints, the GST Council had set up a ministerial panel to suggest ways to boost the realty sector.
Here are five major expectations from the meeting:
1] Reduction of GST on under construction inventory
Indian realtors have already submitted their proposal to reduce rates for under construction units from 12 per cent to 5 per cent. The proposal also cites that the rates should be reduced without the Input Tax Credit (ITC).
2] Reduction in GST on affordable houses
The government of India has already received a proposal in regard to the reduction of the GST on affordable houses from 8 per cent to 3 per cent. This proposal also demands tax reduction without ITC as ITC goes unutilised due to the high tax rates on the raw materials.
3] Reduction in GST on cement
The council can also take a decision on the demands of the Cement Manufacturers Association in India for lowering the GST on cement from 28 per cent to 18 per cent. Majority of the realtors have extended their support to the cement manufacturers as cement is the basic raw material for them and due to the high GST rate, their ITC goes unutilized.
4] Duty draw-back scheme for exporters
In the GST regime, compensation for taxes other than the BCD (basic customs duty) is not given to the exporters. Industry insiders have observed that their competitiveness is being affected due to this arrangement. The GST Officials involved in the exercise confirmed that the duty drawback scheme is being prepared after a requisition letter from the DGFT (Directorate General of Foreign Trade) to the Central Board of Indirect Taxes & Customs seeking such relief.
5] Levy on the transfer of development rights
The 33rd GST Council’s meet is going to examine the levy of GST on the transfer of development rights in case of the joint development agreement.