Following the recent exemption offered on development rights from the goods & services tax (GST), NAREDCO, the representative of Realtors have asked for clarity from the Ministry of Housing and Urban Affairs through a written note.
Earlier, the Goods and services tax (GST) had announced for the relaxation on certain development rights, viz, transferable development rights (TDRs), development rights certificates (DRCs) and joint development agreements (JDAs). In context to such exemption, the Realty developers have asked for clarity on the same, so that they could get the exact benefits of the GST exemption.
National Real Estate Development Council (NAREDCO), which is the Realtors’ representative body, has asked for clarity from the Ministry of Housing and Urban Affairs regarding the exemptions which have been allowed on some of the development rights.
On last Sunday, the GST Council made an announcement regarding the exemption of intermediate tax on development rights for all such residential projects on which GST is charged.
It has been decided by the Government to cut the GST rates for more than half of the existing, i.e, to 5% from 12% for the under construction projects. It has been a wide range in the Housing area where the GST rates have been cut and have been abolished in some cases. The First and foremost is that ITC has been removed from the loop and the GST on affordable housing has been reduced to the minimum, i.e, 1% by the Council. An elaborated and expanded definition of such homes has also been brought in context. The ‘ready to move’ properties which have received occupancy certificate (OC) are kept out of the Ambit of GST.
“What if some units are being sold after the project is completed? Being a completed project that has already received an occupation certificate, it will not attract GST. Will the JDA or TDRs used in this project still attract intermediate tax? We need to get clarity on this,” said Niranjan Hiranandani, national president, NARDECO.
It has been already been clarified by the Ministry through an announcement that the scheme would be detailed and would be worked out by an officers committee and later it would get approval from the GST Council in a meeting to be conducted soon especially for this purpose.
As of now, full-fledged working on the scheme is pending yet which would be carried out by an officers’ committee, the developer’s body has decided to come up with representation in order to clarify any confusions or litigations which might occur later in this episode.
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The GST exemption is made liable only on such residential projects on which GST is payable and as per NAREDCO this condition to be got exempted from GST would be misleading and would result in litigations.
The letter which has been sent to the Ministry earlier this week by the developers’ body is content with the details and hints about the evidence which could lead to confusion and litigations.
The examples include 1) a residential project with convenience and also retail shops, 2) smart and integrated townships for mixed-use development and 3) the sale of residential units after the completion of the project.
The NAREDCO has suggested wordings for the representation. According to the body, the wording should be like;
- Tax on development rights, such as TDR/JDA
- Long-term lease (premium), FSI shall be exempted
According to NAREDCO, the concept of levying of ‘intermediate tax’ is not feasible and following it the exemption should not be restricted just to ‘residential property’. But it should be covering all the segments and types of property including the commercial sector.
