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Reduce GST to 6%, demand realty developers

Real estate developers association have started making demand to reduce Goods & Services Tax (GST) from 12% to 6% on under construction property transactions.

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Real estate developers association have started making demand to reduce Goods & Services Tax (GST) from 12% to 6% on under construction property transactions.

On Wednesday, National Real Estate Development Council (NAREDCO) approached the union government to fix GST rate for the real estate sector at 6% from the current rate of 12%.

The demand was presented to Hasmukh Adhia, Secretary, Finance and P. Radhakrishnan, Minister of State for Finance & Shipping. 

NAREDCO is of the opinion that GST rate of 6% with an input tax credit will be a win-win situation for all stake holders.

Capping GST at 6% will incentivise buyers to invest in under construction properties, who otherwise are waiting for completed properties to save 12% GST.

Payment of GST is on and above stamp duty (6% in Maharashtra) and registration charges (1%) levied by the government. Apart from these levies, a home buyer is also asked by a developer to pay for parking slots, development charges and other development charges.

All these charges combined, increases the apartment cost by over 20%.

“Land cost is the most significant part of the project cost in a real estate project. The abatement of 30% for land cost is not enough and it should be pegged at 50%, even though the land cost in cities like Mumbai and Delhi National Capital Region it may go up to 60-70% of the property cost,” said Niranjan Hiranandani, President of NAREDCO.

While NAREDCO Chairman Rajeev Talwar added that " We feel a step to reduce GST rate would go a long way in boosting demand. The buyers stand to benefit as developers would pass on the benefit to the buyers. The government also stands to benefit as they will collect more tax because of increase in demand. This is a win-win situation for all.”

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