Ahead of the GST Council meeting on Tuesday, West Bengal Finance Minister Amit Mitra has proposed that the new goods and services tax (GST) rate for ongoing residential housing projects be made optional.
The GST Council meeting slated for Tuesday will take up the issue of finalising the rules and procedures to implement the decisions of the last Council on real estate.
In his latest letter to Union Finance Minister, Arun Jaitley, Mitra has said that while the basic decision of bringing the effective rates of affordable housing and non-housing to 1 per cent and 5 per cent without input tax credit (ITC) was something everyone agreed upon, the mechanism being proposed was highly cumbersome and mind boggling.
Mitra said if the developer had purchased material and taken the ITC, he would be permitted to use only the percentage he had invoiced and had to reverse the rest. This needs to be done project wise though earlier accounts were not maintained project wise, he said. The net result would be that the cost of the project would increase immediately and the consumer would end up actually paying more rather than less, he added.
Also, according to him, the formulae specified would leave a lot of discretion with the tax authorities and might encourage rent seeking.
In the previous meeting, held on February 24, the GST Council had slashed tax rates for under-construction flats to 5 per cent and affordable homes to 1 per cent, effective April 1.
Currently, GST is levied at 12 per cent with an ITC on payments made for under-construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is 8 per cent...Read More
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