Budget 2018: In July last year, Modi government introduced GST or Goods and Services Tax. As per the pre-budget memorandum by NAREDCO, the intent of GST is to be tax neutral and create One Nation One Tax.
Budget 2018: With just days remaining for the union budget to go on the floor, industry giants from various sections have come forward to give their suggestions that may be included in the budget 2018. On February 1, finance minister Arun Jaitley will present the union budget and the entire country will be glued to the screen, in hopes for a better fiscal year. In July last year, one of the biggest decisions that were implemented by the Modi government was the inclusion of GST or Goods and Services Tax. According to the pre-budget memorandum by NAREDCO, the intent of GST is to be tax neutral and create One Nation One Tax. However, people in the housing sector are bearing the brunt of GST and are hoping for some relaxation in the union budget.
Before GST, the taxes on Housing sector were 4.5 per cent Service Tax and 1 per cent VAT, total 5.5 per cent. However, after the implementation of GST, 5.5 per cent tax has gone up to 12% (after abatement for land), which is more than double. As this tax burden is ultimately passed onto the end consumers, they are feeling the real pinch of GST. And many are avoiding investment in under construction properties, especially when there is no GST on completed housing properties where completion certificate has been obtained.
This move doesn’t align and contradicts the basic objective of GST, that is to be tax neutral. However, this has impacted even the affordable housing projects under Pradhan Mantri Awas Yojana “Housing for all by 2022”. In its pre-budget memorandum, NAREDCO has requested the Modi government to bring GST on under construction housing properties to 12 per cent slab, with 50 per cent abatement for land, and Input Tax Credit (ITC), from existing 18 per cent slab with 1/3rd abetment for land and Input Tax Credit. This will bring the effective GST rate at 6 per cent, which ultimately will be tax neutral for the end consumers.
The NAREDCO pre-budget memorandum also highlighted another aspect which can benefit home buyers and realtors. It asked the government to impose No GST on end consumers and No Input credit to the developer. This will create a win-win situation for all. Government will not lose revenue and consumers will not have to pay GST. This will also create a healthy market for the housing sector.