Dutt calls for cut in GST on Cement

The Federation of Indian Chambers of Commerce and Industry (FICCI) has welcomed further reduction in GST rates, calling it a big boost for the Indian real estate sector as it will help propel the demand in housing.

“The government has very timely assessed the need of the hour. The customers needed this relief,” said Sanjay Dutt, Chairman, FICCI Real Estate Committee and MD and CEO TATA Housing and TATA Realty and Infrastructure Ltd while applauding the Recommendations of the 33rd GST Council meeting.

“It will help unlock value from under construction projects, which is critical to restore confidence in the developers as much as the customers.”

Dutt elaborated that the extension of definition to housing prices within Rs.45 lakhs will lift sales in this segment now falling in the affordable category across cities and help customers as well as developers not to mention encourage lenders allocate or make available more capital for this segment.

“The input tax credit is critical for the developers and many would get hit. The Government should reconsider this aspect, also the affordable segment will gain much needed focus with this policy.”

Dutt also expressed the need of similar decision on reducing the GST on cement from 28% to single digits as it directly impacts the affordability of houses.

The GST council’s decision on reducing the tax rate on under-construction homes to 5% and significantly slashing the rate on affordable homes to 1% from 8% is a win-win situation for both developers and home buyers, added Rajeev Piramal, Co-Chairman, FICCI Real Estate Committee and Vice Chairman and Managing Director, Peninsula Land Ltd.

“The government’s decision on expanding the scope of affordable housing is in sync with its vision of ‘Housing for all by 2022’. We believe this move will encourage home buyer sentiments and will significantly boost the demand for affordable homes,” he said.

Real estate sector is one of the largest contributors to the national GDP and provides employment opportunity to large numbers of people.

“Housing for All by 2022” envisions that every citizen would have a house and the urban areas would be free of slums.

There are reports of slowdown in the sector and low off-take of under-construction houses which needs to be addressed.

To boost the residential segment of the real estate sector, the GST Council recommended in its 33rd meeting held 24 Feb 2019:
GST rate:
GST shall be levied at effective GST rate of 5% without ITC on residential properties outside affordable segment;
GST shall be levied at effective GST of 1% without ITC on affordable housing properties.

Effective date: The new rate shall become applicable from 1st of April, 2019.

Definition of affordable housing shall be:
A residential house/flat of carpet area of up to 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value up to Rs.45 lakhs (both for metropolitan and non-metropolitan cities).

Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).

GST exemption on TDR/ JDA, long term lease (premium), FSI:
Intermediate tax on development right, such as TDR, JDA, lease (premium), FSI shall be exempted only for such residential property on which GST is payable.

Details of the scheme shall be worked out by an officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.

Advantages of the recommendations made:
The new tax rate in principle was approved by the Council taking into consideration the following advantages:

The buyer of house gets a fair price and affordable housing gets very attractive with GST at 1%.
Interest of the buyer/consumer gets protected; ITC benefits not being passed to them shall become a non-issue.
Cash flow problem for the sector is addressed by exemption of GST on development rights, long term lease (premium), FSI etc.
Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing.
Tax structure and tax compliance becomes simpler for builders. fiinews.com