LAND GST LEASING, ON RENTING OF COMMERCIAL SPACE TO AFFECT MULTIPLE SECTORS

Not just real estate but transport and warehousing sectors would also be affected if the government goes ahead with its plan to levy the goods and services tax (GST) on leasing of land, renting of commercial space as well as EMIs paid for the purchase of under-construction houses. According to industry experts, bringing leasing of land under the GST ambit comes as a surprise to many as it was not supposed to be a part of it earlier. However, its effects would be offset by tax credits that people would get in return for paying GST. Major transporters lease land to keep their trucks as well as other vehicles. “As much as the ambit of GST is expanded it would have its pluses and minuses. We believe that whatever would be levied under GST, we would be able to reclaim it in tax credits. This would help major transporters and logistics players,” said SP Singh, senior fellow, Indian Foundation of Transport Research and Training. The sale of land and buildings will, however, be kept out of the purview of GST, the new indirect tax regime. Such transactions will continue to attract the stamp duty, according to the legislations Finance Minister Arun Jaitley introduced on Tuesday in the Lok Sabha for approval. The real estate sector is worried about the percentage of tax to be levied, which they fear would be kept at a minimum of 12 per cent. At present, while service tax is levied on commercial space renting, for under-construction houses, service tax and value added tax (VAT) are both charged at around nine per cent. “The tax in GST regime should not be more than what it is at present. We have made a representation to the government to keep it between eight and nine per cent,” said Parveen Jain, president of real estate body NAREDCO. There are also fears that an increase in taxes on EMIs might further impact the residential sector. However, experts expect some changes in the new tax regime during the March 31 GST Council meeting.