A ministerial panel headed by Gujarat deputy chief minister Nitin Patel will look into the possibility of rationalization of GST rate for the real sector besides formulating a composition scheme — a preferential scheme under GST extended to consumer centric sectors or industries.
The GoM will now decide on the issue of reducing the current GST levied on real estate which is 12 percent to five percent. The move follows the GST Council meeting on January 10 that referred matters pertaining to the sector to the Group of Ministers due to lack of consensus.
Tax experts say that while composition schemes may look attractive, one needs to do a thorough analysis to weigh whether a reduced GST rate of 5 percent without input tax benefit is better than a standard rate of 12 percent with full input tax credit.
One view is that if the composition scheme is introduced in the real estate sector, it may result in reduction of prices of properties owing to lower rate of tax and bring higher degree of certainty regarding compliance under GST law.
Also, under the composition scheme, the taxpayer is not allowed to collect tax from customers for inputs used. Thus, if the proposal for composition scheme for reality sector receives consent, buyers cannot be charged extra on account of GST paid for the raw material (inputs) used by the builder.GST replaced a plethora of age old 17 central and state taxes and 26 cesses in 2017. GST was seen as a tax that would liberate the taxpayer from the evils of cascading, multiplicity of levy, unwarranted litigation, and compliance burden, among others.
The GoM is expected to also analyse tax rate of GST, including issues/challenges in view of the proposal for shoring up the real estate sector. The panel would examine the legality of inclusion/exclusion of land or any other ingredient, in composition and suggest valuation mechanism.
Courtesy/By: Sakshi Shukla
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22 Jan 2019
