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GST Council to discuss realty rates

Wednesday’s meet to also examine ways to boost collections

The Goods and Services Tax Council will meet via video-conferencing on Wednesday to discuss key issues such as the possible reduction of GST rates on the real estate sector, and ways to increase tax collections.

Experts feel that this will be the last meeting of the Council before the general elections, since the model code of conduct will come into force soon. The GST Council, in December, had created a Group of Ministers to look into the applicability of GST rates on under-construction properties. One of the options reportedly recommended by the GoM was to reduce the tax rate on the sale of such properties to 5% without input tax credits (ITC) from the current 12% with ITC. Addressing the real estate issue, however, is a much more complex issue that requires more nuanced solutions, according to tax experts.

Input tax credit

“I’m not sure how they can look at it [real estate] as a standalone issue,” Archit Gupta, founder and CEO of ClearTax said. “It is a deeper issue and they should take a more holistic view of how the input tax credit set-off will play out, whether the rates on cement will be reduced, etc. It also causes credit blockages, because if you are not getting input tax credits then that breaks the chain. It may be difficult to give a complete solution at this juncture.” “If the input credit has to be restricted, then it is important that the rates on key inputs such as cement and the tax paid to construction contractors should also be reduced,” Pratik Jain, Indirect Tax Leader at PwC India said.

In general, tax experts feel that removing ITC for the real estate sector would be a big blow to the structure of GST since it would open the doorway for other sectors to ask for similar treatment, whereas the backbone of GST is built on the provision of ITC.

Apart from the single-point rate agenda of real estate, the Council will likely discuss ways to improve overall collections as well.

“They are looking at means to boost collections,” Mr. Gupta said. “They have shown that they can cross ₹1 lakh crore, so they will be looking at how to replicate this and even increase collections.”

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