Real­tors want dif­fer­ent GST rates based on lo­ca­tion of projects...

The Hindu Business Line - - NEWS - AB­HISHEK LAW

Goods and Ser­vices Tax (GST) on un­der con­struc­tion projects is hurt­ing cash flow of real­tors. Slow­down in book­ings and ap­por­tion­ment of land cost value are two pain points.

Along with the stamp duty and the reg­is­tra­tion fee of 7– 8 per cent, and, a 12 per cent GST, the to­tal tax goes above 19 per cent for an un­der-con­struc­tion pro­ject. Be­fore the GST was launched, a ser­vice tax of ap­prox­i­mately 5 per cent was levied and a 5 per cent VAT by some State gov­ern­ments, in ad­di­tion to the stamp duty and reg­is­tra­tion fee.

Land cost ap­por­tion­ment

Ac­cord­ing to Jaxay Shah, Na­tional Pres­i­dent of CREDAI, the prob­lem arises with the way pro­ject costs are bro­ken-up.

Land cost is fixed at one-third of the pro­ject value and is kept out of the GST rate. (GST on con­struc­tion is 18 per cent. Tak­ing out the land cost it comes to 12 per cent.)

But, in many cities and their im­me­di­ate out­skirts, land cost is much higher than this 33.333 per cent. It could go up to as high as 60 per cent in some prime lo­ca­tions. How­ever, the max­i­mum ben­e­fit that a de­vel­oper gets is re­stricted to just one-third. He does not get any ad­di­tional re­fund. Nat­u­rally, this cost is passed on to the buyer.

This has re­sulted in a dip in the num­ber of book­ings for un­der-con­struc­tion prop­er­ties. “Buy­ers can now af­ford to wait for some time. And there is a liq­uid­ity con­straint in some mar­kets. There has to be some mech­a­nism avail­able to ben­e­fit both the de­vel­op­ers and buy­ers,” Shah told Busi­nessLine dur­ing an in­ter­view.

Fin­ish­ing work be­fore han­dover is nearly 40 per cent and this ad­di­tional cost has to be borne by de­vel­op­ers now. Large play­ers can af­ford it, but small de­vel­op­ers are finding their re­sources stretched. In fact, some de­vel­op­ers, who were not will­ing to go record, con­firmed to the dip in book­ings and said that liq­uid­ity too was af­fected.

Dif­fer­ent tax slabs

The de­vel­op­ers’ body wants dif­fer­ent GST rates based on city be­ing a tier- I, tier- II or tier- III lo­ca­tion. “We are all in favour of GST and sup­port it. But, our ap­peal is please dif­fer­en­ti­ate the GST levy based on whether it is a tier- I, tier- II or tier- III lo­ca­tion. Land cost in Kolkata and As­san­sol won’t be the same. Then why should there be a sin­gle tax rate,” he said.

Jaxay Shah, CREDAI Na­tional Pres­i­dent

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