Even as the taskforce of the 13th Finance Commission has
suggested including real estate in GST as it would
benefit homebuyers, in a potential blow to businesses,
it has recommended that input tax credit should not be
available for tax paid on construction or acquisition of
property. “Those buying a building for commercial use
can not take credit on it, unlike the present system,”
said Satya Poddar, partner Ernst and Young.
Businesses with an annual threshold of up to Rs 10 lakh
would however be exempt from GST so as to eliminate ‘an
excessively large number of landlords seeking GST
registration’. But the taskforce’s recommendations aimed
at rationalisation and simplification of the multiple
Central levies on real estate as well as the cumbersome
stamp duty will provide much needed relief.
The task force has called for subsuming stamp duty
levied by states on immovable property (including land)
under the GST regime. As a sweetener, it has proposed
that transactions in immovable property can be subsumed
in 2010-11 while stamp duty can be gradually phased out
in three years’ time.
With real estate developers proposed to get input tax
credit on all inputs, the cascading effect of taxes
would be removed. “This would have a significant
downward effect on pricing of real estate…with greater
transparency though market mechanism, the role of
underworld elements in the sector will also be
eliminated,” the report said.
It has further said that GST should be applied to all
newly constructed property. But all secondary market
transactions in immovable property, irrespective of
their date of construction, should attract GST. The
report said that if a building is constructed for
residential purpose, GST should be applied on the cost
of construction, while if it is sold, then the tax
should be levied on the sale as well.
