GST Council to issue new tax norms for real estate

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Federal indirect tax body the Goods and Services Tax (GST) Council will on Tuesday announce new rules on how far builders can make use of credit for taxes paid on raw materials and services in settling their final tax liability as the sector moves to a new tax regime from 1 April. The Council has designed a formula to allow builders to take advantage of the tax credits on their books as best as GST principles will allow. Policymakers want to give relief to builders to the extent possible as unused credit will either push up the cost of property or impact the bottom line of builders, explained a government official, who asked not to be named.

The GST Council had decided on 24 February to lower the tax rate on under-construction residential properties from an effective 12% to 5% and on under-construction affordable houses from an effective 8% to 1%. The new tax structure does not allow builders to use credits for taxes paid on raw materials to be used for settling part of their final tax liability. The new rules to be announced on Tuesday will specify under what circumstances sale transactions initiated in the current tax regime but concluded after 1 April will be eligible for credits on taxes paid on raw materials and services.

It will clarify on the tax rates applicable and the availability of tax credits in a host of scenarios including where the builder has paid taxes on raw materials but has either not started construction or has only half-completed the construction. These rules were necessitated as home buying is often a lengthy affair while the new tax rate kicks in from a specific date. The move is significant considering that many builders are grappling with project delays which are likely to continue beyond 1 April. “We had extensive discussions on the impact of the new tax regime on the real estate industry. The new formula for utilization of credit during the transition period takes into account the fact that unlike other industries, real estate projects have a long gestation time,” the official quoted above said on condition of anonymity.

 

Read more at: https://www.livemint.com/news/india/gst-council-to-issue-new-tax-norms-for-real-estate-1552848185932.html