Exempt the Affordable Housing sector in India from GST

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With the new GST enactment coming into force in India, the fact is that there is substantial detrimental impact which GST has on Affordable Housing. The Tax on Affordable Housing has gone up from 3 to 20 times depending on state to state. There are many stories going around about the impact on the final prices to the consumers. However, one impact which no one seems to be speaking about is the impact that GST will have on Affordable Housing in India.

 

Pre-GST Scenario:

GST is a replacement tax for Service Tax and VAT.

In the pre-GST scenario, ‘construction service’ is subject to service tax @ 4.5% (Abatement of 70% on standard service tax rate of 15%). However, affordable housing has been exempt from the purview of service tax vide Notification No. 9/2016-ST.Thus, in the pre-GST scenario, there is NIL Service Tax on Affordable Housing projects.

As far as VAT is concerned, VAT is variable from state to state. Some states have made material inroads into the Affordable Housing target of Prime Minister Modi. Haryana and Rajasthan have made substantial inroads into Affordable Housing in India. In Haryana (which has around 20,000 Affordable Housing units under construction) , there is a complex VAT calculation methodology with Developers charging between 4.00% and 5.25% with the facility of Input Tax credit. In Rajasthan, VAT is payable @ Rs 1300 for every 2 lakhs – approximately 0.65%. Both these states have no exemption of VAT on Affordable Housing.

This makes the total tax payable on Affordable Housing in the pre-GST scenario to 0.65% to 5.25%.

 

Post-GST Scenario:

There is no Service Tax like exemption for Affordable Housing under the GST enactments. There is a 12% GST with input tax credit, on all under-construction real estate buildings/structures. There is an exemption for beneficiary-led individual house construction which are extremely minor in the real estate industry.

The Government believes that this will lead to a reduction of prices of real estate.

This make us wonder how this would be a possibility for Affordable Housing units where the prices were frozen prior to the implementation of GST – approximately 20,000 units for as many number of families in Haryana alone.

The tax on Affordable Housing units under the Affordable Housing Scheme of Haryana has almost tripled from 4.00-5.25% to 12%. For Rajasthan, this has gone up 20 times from 0.65% to 12%.

 

Where are we heading to ----- DISASTER!!! This request is to the Government of India to exempt the Affordable Housing sector from GST else our Prime Minister Modi’s vision of Housing for All by 2022 will end in exactly that ---- DISASTER!!! Is the BJP supremo Narendra Modi listening?

 

 

 



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