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5% GST without input tax credit on realty favourable for developers

Press Trust of India/Kolkata 21 Feb 19 | 06:30 PM

The proposed bid by the Centre to reduce GST on the under-construction houses to a maximum of 5 per cent without input tax credit (ITC) has been welcomed by developers who think it will revive demand.

"We are looking forward to 5 per cent GST without ITC though it will hurt the builders in the short run. We expect the demand for under construction housing will revive and will offset the impact in the long run," Credai Bengal president Nandu Belani told PTI.

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This is a critical matter and the outcome will have a notable impact on real estate market sentiment, Anarock property consultants chairman Anuj Puri said.

Currently, despite a provision in place for receiving ITC, buyers are unsure about how and when they will receive this benefit. Therefore, a flat 5 per cent GST without ITC is the best option for buyers, it said.

"Even a small increase in sales on the back of reduced GST will give some relief to developers funding issues by catalysing sales to some degree. To that extent, developers will see some improvement in their balance sheets," Anarock said in a note.

The move is expected to benefit government also. The current 12 per cent GST prompts buyers to opt for ready-to-move-in properties which are exempt from this high tax.

A move to slash GST rates to 5 per cent will help attract more buyers to under-construction properties, on which stamp duty and registration can be charged, the consultant observes.

The government decision on reduction of GST slab to five per cent and three per cent for premium and affordable housing has been deferred to February 24.

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