With an eye on mobilising support from Mumbaikars in the coming assembly election, BJP leader and state finance minister Sudhir Mungantiwar has appealed to the Centre that GST Council to reconsider GST payable on development agreement for redevelopment projects.
Mungantiwar, in a communication dated September 16 to the finance minister Nirmala Sitharaman, referred to the notification issued on March 29 this year wherein GST is payable on development agreement for reconstructed flat allotted to existing tenant, members and slum tenement free of cost. "In case of redevelopment projects by Slum Rehabilitation Authority (SRA), Maharashtra Housing and Area Development Authority (MHADA) and of Cessed buildings, the existing members of society do not trade or sell the flats allotted to them. It is purely for self use and therefore it is highly unfair and unreasonable to expect GST on these flats given free to them,'' he said.
Mungantiwar swung into action after he received representation from the BrihanMumbai Developers Association (BDA) which feared that if the proposed GST structure is adopted which burdens the existing members (owners), the redevelopment would totally come to a halt and such societies be deprived of the deserved redevelopment. The beneficiaries covered in such schemes are mostly middle class people. The minister said due to acute shortage of free land various redevelopment schemes have been evolved like redevelopment of housing societies, dilapidated old buildings and slum rehabilitation wherein the land remains with the owners and redevelopment is carried having advantages of additional floor space index. "Owners including housing societies without shelling out any expenses make an agreement with builder who make them available extra area and in turn earns by accommodating additional members. A win-win situation prevalent in the market would be totally jeopardised and become nonviable if the proposed GST structure is adopted,'' he noted.
FILLIP TO INFRA
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Mungantiwar’s intervention comes after DNA last week broke the story that the minister has called upon the GST Council for the reduction in GST levied on redevelopment from 5% to 1%
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| His argument was that construction of homes through the Slum Rehabilitation Authority (SRA) does not yield significant return to the developer |
BDA committee member Harish Jain informed that as per the March 29 notification the developers in Mumbai from Borivali to city limits will end up paying GST of Rs 2,800 per sq ft to Rs 5,000 sq ft on balance carpet sale aea which is practically not feasible. Incidentally, this does not include GST on sale of free sale units which is paid by the purchaser.
"It is not possible for the developer to be able to sell off all flats before Occupational Certificate is granted. The margins are so poor that it is completely unviable for the developer to bear this additional burden especially when the real estate industry is in a stressful stage,'' Jain said. He said BDA delegation urged Mungantiwar to take up their case with the finance ministry as redevelopment, slum development and cess building development are only in Mumbai and separate GST recovery policy for redevelopment needs to be formulated on an urgent basis.
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