GSTC defers real estate tax cut decision

NEW DELHI: The Goods and Services Tax Council (GSTC) could not consider slashing taxes on residential properties on Wednesday after finance ministers of some opposition-ruled states appealed the chairman not to rush a crucial decision with long-term ramifications, officials with direct knowledge of the matter said.

GSTC, the apex decision-making body of state finance ministers chaired by Union finance minister Arun Jaitley, formed two Goms (groups of ministers) in mid-january to rationalize tax rates for the real estate sector and the lottery business. The GOM, headed by Gujarat deputy chief minister Nitin Patel, recommended in its report that tax rates for under-construction residential properties be cut to 5% from 12% without input tax credit, and for affordable housing from 8% to 3% without input tax credit.

At least eight members from states ruled by parties opposed to the Bharatiya Janata Party (BJP) expressed their reservations that undue hurry on this matter could be detrimental where the ratio of land and building components is proposed at 30:70 for taxation purposes. The move will see a sharp hike in property rates in places where the land is cheaper. On the other hand, prices of properties would drop in places like Delhi and Mumbai, where land is costly, the officials said on condition of anonymity.

Finance ministers of some states also raised the cases of double taxation in the real estate sector where both stamp duty and GST are levied. Punjab treats a long-term lease as the sale of property that attracts stamp duty and demanded that such cases should be exempt of the GST, the officials said.

Most of the members also demanded that such important matters could not be deliberated through video conference and it was agreed by the chairman that a face-to-face meeting will take place on Sunday, officials said.

“Jaitley sahib (the chairman) is a true democrat. He has a majority in the council. He could have taken decisions even without our support. But, he agreed to meet us on Sunday to deliberate on these issues. Decisions of the council are always unanimous,” Punjab finance minister Manpreet Singh Badal said.the 33rd meeting of the council also decided to extend the deadline for filing summary sales return (GSTR-3B) for January by two days till February 22. “…the suggestion before the GST council was to extend the deadline by two days for all states; and since some areas are facing disturbance, for Jammu and Kashmir it be extended till February 28. So we took that decision,” Jaitley said.

The other GOM that deliberated on lottery, proposed a uniform GST rate of either 18% or 28% on it. Currently, state-organized lotteries attract 12% GST, but state-authorized lotteries attract 28% tax.

Abhishek Jain, tax partner, EY India, said: “The real estate industry and customers are eagerly awaiting GST rate rationalisation on under construction properties. Hope the GST Council achieves consensus and approves the rationalisation in its meeting on Sunday”.