On Wednesday, Union Finance Minister Arun Jaitley said that the GST Council members will discuss to be included real estate sector under the newly implemented Goods and Services Tax (GST) Regime. He further added that it is one of the sectors where the maximum amount of tax evasion and cash generation occurs.
While addressing the ‘Annual Mahindra Lecture’ at the Harvard University, Arun Jaitley said, the inclusion of real estate sector matter will be discussed at the upcoming meeting of GST, which is scheduled on 9th November in Guwahati. Presently, real estate, hard drinks and petroleum products are three sectors still outside the indirect taxation system.
Finance Minister Arun Jaitley said, “The one sector in India where the maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the States have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST.” He further added, the consumers will be benefited with the new decision and they will have to pay only one tax i.e., ‘final tax’ on the whole project. He further added that “In the next meeting itself, we are addressing one of the problem areas or at least [having] discussion [on] it. Some States want, some do not. There are two views. Therefore, by discussion, we would try to reach one view,” he said. “As a result, the final tax paid on the whole product in the GST would almost be negligible”, said Jaitley.
Presently, 12 percent taxes are being charged on the construction of apartments, buildings and the civil structure intended to be used for sale to the buyer, either entirely or partially. On the other side, land, as well as other immovable property, have been kept outside from the Goods and Services Tax (GST) Regime.
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While speaking on the demonetization, Mr Jaitley said that it was considered a “fundamental reform”, that was required to modify India into easier compliance society.
Mr Jaitley said, “If you see the long-term impact of it, demonetization brought in more digitized transactions; it brought the issue to the centre stage. It expanded the individual tax base. It compressed the cash currency by three percent that was operating in the market.” He further added that “Those objectives are for the long-term. No doubt there are short-term challenges, but [necessary] for transforming India from a non-compliant to a more compliant society.”
In the past, India was considered one of the least efficient tax systems across the world along with a super small tax base. Mr Jaitley said, “Frankly, over the last several decades, serious efforts, real efforts to expand this base had not been made. You had marginal efforts.” By adding that, to meet the challenges of the “shadow economy” systematic efforts were prepared by them recently.
Mr Jaitley said, “In the last few years, the bulk of the increase in taxpayers has not been in terms of the number of companies but individuals who are coming into the tax net.” By adding that “some of the people had misinterpreted the concept of demonetization, which wasn’t to confiscate somebody’s currency”.
He said, “Obviously if somebody has currency and deposits in the bank, it does not become lawful holding. They still have to account for it. Therefore, the anonymity which was attached to a cash currency came to an end and that holding got identified. The government was able to trace out about 1.8 million people whose deposits are disproportionate to their normal incomes. And they are all to answerable to the law and pay their taxes.” Mr Jaitley will go for a long weekend and stay in the US, during the period he will attend the annual meetings of the World Bank and also IMF.
