Real estate sector seeks input tax credit on development of leased commercial properties

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The government should allow commercial real estate developers to set off GST paid on inputs like cement from the tax liability on rental income to avoid double taxation and give a boost to the office market to help India maintain its advantage in various sectors like IT and startups, realty firms and consultants said on Sunday.

In its Budget recommendation for the 2021-22 fiscal year, industry body CII has demanded that Section 16 read with Section 17(5) of the CGST Act should be amended to enable the real estate players to avail ITC (input tax credit) on procurement of goods and services during the construction phase where the said immovable property is intended for commercial leasing or renting.

The denial of ITC, leads to blockage of funds for a real estate player, it said. “In case of commercial leasing of properties and outlets at malls, the renting of such premises attracts 18 percent which is available as credit to the client. Disallowance of credit during the construction phase leads to the increased cost of construction, working capital loss, increased financing costs impacting the entire supply chain,” CII said.

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