CREDAI seeks input tax credit on GST, which can reduce house prices
CREDAI on Tuesday requested that developers be granted the input tax credit (ITC) under the GST scheme, which may result in a 10 percent decrease in housing costs. CREDAI, which has over 13,000 developers, asked the federal government to ease the ITC for property developers under the composite GST system.
‘CREDAI firmly thinks that this step may rationalize the real estate price by 10 percent and stimulate the delivery of affordable housing projects throughout Tier I markets due to the existing excessive construction costs,’ the Association stated in a statement. There is a GST of 5 percent on underbuilt apartments sans input tax credit. Concerning affordable housing, the GST is 1% without ITC. The finished items are not charged for GST.
CREDAI requested that the government enable developers to select between an ITC 12% GST rate (assessment scheme) and an ITC (composition scheme) GST rate of 5%, giving the necessary financial flexibility throughout the testing period. Developers are unable to use ITC under the existing composition system, he said, which has a negative effect on building costs and home prices.
Taking into account India’s typical rates of housing range from Rs 4,000 to 4,500 per square foot, the lack of the input tax credit means that housing costs would be approximately raised to Rs 400 – 450 per square foot. The Association also noted that 28% GST on cement reduces the feasibility of a large number of affordable housing projects.
GST is an indirect tax that always passes and denies it just leads to a rise in consumer prices. The price increases of cement, steel, and metals, among other things, have greatly increased the GST component of input services. And all these hikes in GST impact the common people. In such a situation, it would be preferable for builders to opt for ITC and charge 12% of GST.
If demand is acknowledged, home costs will decrease by about 7-10%. However, in the case of building and labor contracts linked to property, the concept is not observed. Jalan stated that from 1 April 2019, for the building of a residential flat, the ITC was not accessible to the receiver of the construction unit service.
Moreover, certain raw materials such as cement are taxed at 28 percent, which has to be cut to 12-18 percent, he said.
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