The new GST (Goods and Services) Bill looks promising and is all set to create a wave of positive effects on trade and industry in India.
This new tax bill happens to be India’s biggest tax reform till date, and by introducing it, the government is seeking to simplify the current system of taxation. This bill aims at uniting all the sectors across the country and creating a unified, nationwide market where all indirect taxes will be replaced with a single tax.
However, the real estate industry won’t be enjoying the tax benefits of the new GST system. With the government insisting on an additional stamp duty on all landed properties, the real estate sector will still be subjected to multiple taxes even after the introduction of the GST.
What does this mean?
All indirect taxes in every industry will now be covered by the GST. This means that every industry pays a single, unified tax to the central and state governments.
However, the GST for real estate is fixed at 12%, which is just one part of its total tax burden. Along with this, the government levies an additional stamp duty of 5%-8% of the value of the property.
This means that in addition to paying the regular tax borne by other industries, the real estate sector must also bear the burden of an extra, indirect tax. And in this sector, where transactions can be in crores, this adds up to quite a bit.
What CREDAI proposes
The real estate sectoral body, the Confederation of Real Estate Developers’ Associations of India (CREDAI), is in negotiations with the government and is trying to persuade them to reconsider the stamp duty.
CREDAI had two reasons that it presented in front of the government.
- The GST Bill integrates all centre and state taxes into a comprehensive, unified tax regime for the entire country. By including stamp duty, the real estate sector must still bear the burden of indirect taxes, and this is inconsistent with the policies of the GST Bill.
- Stamp duty is payable on each transaction that takes place in the real estate sector, and more often than not, the rates are arbitrarily determined on circle rates or general industry guidelines. This results in sketchy, often illegal transactions, the value of which is far below than outlined by the actual stamp duty.
How abolition of stamp duty will help
CREDAI is urging the government to treat land like any other industry under the GST regime.
It claims that once GST is introduced, industries across the nation will benefit from the move. The positive multiplier effect across industries will ensure a boost in GDP and overall revenue, which will more than compensate for any losses that the real estate industry may experience.
They also say that for the nation to hope to achieve its goal of ‘Housing for all by 2022’, this move is not just beneficial, but imperative.
