Builders body NAREDCO has requested the government to consider lowering the goods and services tax (GST) rate for the real estate sector from the existing 12% to 6% in order to boost fresh housing demand. The body would also like the government to increase the abatement for land cost to 50%, from the existing 30%.
In a meeting with finance secretary Hasmukh Adhia and minister of state for finance & shipping P Radhakrishnan yesterday, the builders' body said that GST rate of 6%, with input tax credit will be a win-win situation for all stake holders.
"Capping GST at 6% will incentivise buyers to invest in under construction properties, who otherwise are waiting for completed properties to save 12% GST," said Rajeev Talwar, chairman, NAREDCO.
The buyers stand to gain as developers would pass on the benefit to the buyers. The government would also be able to collect more tax because of increase in demand. Therefore, all the stake holders stand to gain with this change.
According to Niranjan Hiranandani, president, NAREDCO, the abatement of 30% for land cost, which is the most significant part of the project cost, is not adequate and it should be pegged at 50%.
Builders claim the tax differential between the tax rates for a ready-to-move property and an under-construction property has compounded the problem.
"The GST rate for under construction properties is 12%, whereas for ready to move properties it is zero per cent. This makes the ready to move properties lucrative compared to under construction properties. This in turn is translating in to reduction in fresh and continuous demand," the body said in a release.