GST update on Relief for Real Estate

GST update on Relief for Real Estate – Is this actually beneficial to End Users?

GST Relief for Real Estate – Is this actually beneficial to End Users?

In recent days we have heard the news that Group of Ministers are considering to cut the GST rates on under construction houses. The Group of Ministers have favored to reduce GST rate on under construction houses from 12% with Input Tax credit to 5% without Input tax credit. And similarly have acknowledged reducing the rate for under-construction affordable houses to 3 per cent without input tax credit, from the current 8 per cent.
This approach is similar to the one adopted for restaurants, where their GST rates cut to 5% without ITC from 18% by the GST Council after widespread complaints that they had raised prices despite the benefit of ITC. The above recommendations by the council is a welcome step as Government intends to pass on the benefit of rate reduction to consumers by way of not allowing the input tax credit and implementing the Anti Profiteering Clause. This is a great relief to the real estate industry as it would reduce the requirement for monthly filing of returns to avail ITC, which is cumbersome.
But would the reduction in GST rate provide a real benefit to the end users. Though there is reduction in GST rate to 5% but subsequently input tax credit has not been allowed. Previously, the Output tax would be paid either partly or fully by way of credit, but now it has to be completely to be paid by of cash. Ultimately the loss of ITC would result in increase of prices for the end users and no benefit shall be passed on to them. While the intention of the government is to provide relief to the end-customer, from a structural standpoint, it should be ensured that the chain of GST credit is not broken. Perhaps, a better approach would be to reduce prevailing GST rate on residential property, say, bringing the effective tax rate down to 8% from 12%, while continuing the benefit of input tax credit. This will bring the rates of building down and real benefit will flow to consumers.
This is reason that the opposition ruled states have opposed this move in recent GST council meeting. This is the reason that Finance minister has postponed this video conference meeting and it was decided that such a crucial decision can be taken in live meeting of members. The decision of reduction in rate of cement from 28% to 18% will might be taken at that meeting only.

Comments

GST update on Relief for Real Estate

Post a Comment

Query