With an aim to make affordable housing options even more readily available to prospective homebuyers in India, the central government has requested the various state governments to simply waive off the stamp duty levied for all such projects and rationalised it for some other segments. This was recently declared by M Venkaiah Naidu, the Minister for Urban Development as well as Housing and Urban Poverty Alleviation.
The stamp duty is mainly a state subject, and the state governments decide the rate at which it will be levied. The rates of the stamp duty vary from one state to another and range between 4.6% and 12.5%. This duty has been among the main reasons for the generation of black money in the real estate sector. Many experts have recommended at least reducing the rate to some degree to increase tax compliance.
However, it is believed that complete abolition of this duty is going to reduce prices of the luxury apartments significantly thus benefitting the customers. This is something that was discussed by Naidu while addressing the event that was organized by CREDAI, the realtor’s organization. Naidu also assured everyone that the Goods and Service Tax or GST is not going to cause the prices to rise and it is certainly not going to affect the country’s affordable housing segment.
To ensure that the prices for the low-cost homes remain affordable for the home buyers, Naidu has voiced his approval for exempting this segment from the service tax under GST regime. At present, affordable housing is completely exempted from the sphere of service tax. Naidu also reported that his ministry has already discussed this matter with Ministry of Finance and considers it essential to continue this exemption under GST. India’s affordable housing sector has been given the infrastructure status in the last Budget, and it is going to help in a major way to place more cash in the hands of the home buyers. It is also going to act as a catalyst for the development of various affordable housing projects in the country’s real estate market.
According to Naidu, the Ministry strongly believes that the country’s real estate sector must be taxed at a revenue neutral rate and not at some higher tax rate. Reflecting on the industry demand that the stamp duty must be included within GST, Naidu commented that there is no such provision as of yet to include the stamp duty under the scope of GST. Also, the Constitutional Amendment Act does not approve of such an inclusion. While there is currently no clarity on the inclusion of the real estate tax within the wider scope of GST, the sector is going to be greatly benefitted from the concept of One Nation One Tax that is going to serve as a major reform for the country’s real estate sector and the way it handles its resources.
One of the major advantages for the real estate industry that is going to be presented by the GST is that it will put to rest the cascading of taxes. The input tax credit is going to be available, which is going to serve as a major incentive for all the transactions in real estate industry within this formal system and make it possible for them to enjoy the credits.
It was only last week that the GST Council had approved the draft of key that supports the legislations to enable the rollout of new indirect tax regime starting from July 1st of this year. The Council has approved the final draft for the Central GST (C-GST) and the Integrated GST (I-GST). The Council is also going to take up for the approval of the State-GST and the Union Territory-GST (UT-GST) laws at the next meeting that will be held on March 16th. The new taxing methods are going to get rid of all the legacy issues and encourage a culture of credibility, character, confidence and financial returns.