Credai Demands GST ITC for Reality Developers for Affordable Housing

Realtors council Credai urges for input tax credit (ITC) beneath GST guidelines and must permit the real estate builders to state that it can be directed towards the reduction of the cost by 10%.

Credai, which has 13,000 members in real estate building, has sought the Union government to provide an input tax credit to them beneath the composite GST policy.

The society stated that “Owing to the prevailing exorbitant construction costs, Credai strongly believes that such a move could rationalise housing prices by 10 percent and spur the supply of affordable housing projects across Tier I markets,”

There is a 5% GST excluding any Input tax credit beneath the construction of the flats. There is 1% GST excluding any ITC. there is no GST that is applicable to be charged on the completed buildings.

Credai had sought that the government must permit the builders to opt between a 12% GST rate with ITC (assessment scheme) and a 5% GST rate without an ITC composition policy directing them with much wanted financial adaptability in these testing times.

Credai National President Harsh Vardhan Patodia commented “While the implementation of GST has been a complete game-changer for the entire economy in the last four years, we strongly believe that Indian real estate iew briefly about the impact of GST (Goods and Services Tax) on real estate industry in India. The experts describe the total impact of GST still requires certain tweaks and measures to ensure a more conducive environment for all stakeholders,”

The failure of the builders to claim for Input tax credit beneath the composition policy does influence the price of the construction and the cost of homes.

“Currently, the total value of per square foot GST cost in India lies anywhere between Rs 360-500, varying from project to project. Owing to the prevalent scheme, this results in a proportionate increase in the construction cost, which is ultimately borne by the homebuyers, impacting their purchasing power and overall demand for homes,” the community remarked.

Acknowledging the average cost of the homes all across India whose range is between Rs 4,000-4,500 per square foot, the nonexistence of ITC points to an estimated rise in the cost of the home by Rs 400-450 per square foot, he comments.

The community has directed that 28% GST on cement lessens the viability of the affordable housing projects.

Anarock Chairman Anuj Puri explained that “The real win-win situation for both buyers and developers would have been if the ITC benefit was also included within the existing 5 per cent GST rates”.

He added that the government must diminish the GST rates on cement Grab the information of revised GST slab rates on consumer products in India, Although GST council finalized the slab rates like 5%, 12%, 18% and 28% as well as steel.

Puri clarified that “Also, 12 per cent GST with ITC benefit may further reduce the scope of black money as some players may have resorted to making cash payments for input materials since there is no ITC benefit on them,”

Atul Bhasal CFO of Experion Developers clarified that the GST which is the indirect tax shall always be a pass-through and unaccepting that it shall reveal a rise in cost for the consumers.

He said “With the increase in prices of cement, steel and metals among others, the GST component on input services have gone up tremendously. And all such increases in GST affects the general public at large. In such a scenario, it would be better that there is an opportunity for builders to opt for ITC and charge 12 per cent GST,”

If the demand is accepted then it shall be directed to the lessening in the cost of the homes for nearly 7 to 10%.

Vivek Jalan, the Partner, Tax Connect Advisory Services, commented that “One of the objects of GST was to remove the cascading impact of Indirect Taxes and thus to increase consumption in the country by reducing the prices of goods and services. It is for this purpose that all Input Tax Credit can be availed by businesses on GST paid for goods or services used for the furtherance of business”.

He stated that the principal shall not be followed in the case of the construction and work contracts concerned to the real estate.

Jalan stated that from the start of 1st April 2019 for the construction of the residential flats the Input tax credit has not been furnished to the recipient of the service of building the homes.

28% tax is levied on raw materials such as cement that are required to bring down to 12 to 18%.

“Also, due to the increase in prices of cement, steel, raw materials and services the GST component on input and input services have gone up tremendously and it is seen that the ITC foregone is more than the GST chargeable at 12 per cent. Thus, it seems better that there is an opportunity for builders to choose whether they would like to take ITC and charge 12 per cent GST or forego ITC and charge 5 per cent GST,”