The Confederation of Real Estate Developer’s Associations of India (CREDAI) urged to allow Input Tax Credit (ITC) under the Goods and Service Tax (GST) regime so that the developers, in turn, can reduce the housing prices by 10%.
CREDAI has over 13,000 developers as members, has urged the Central Government to allow the ITC for real estate developers. CREDAI states that it firmly believes allowing ITC could rationalise housing prices by 10 % and push affordable housing projects, considering high construction costs.
As of now, there are two types of GST rates for housing projects. One is GST@ 1% (without ITC) on the affordable housing project, and another one is GST@ 5% (without ITC) on other than affordable housing projects. For commercial projects, GST will be charged @ 12% (with ITC).
CREDAI urged the government to allow developers to choose between the assessment scheme (GST@12% with ITC) and the composition scheme (GST@5% without ITC). Allowing to choose between the options would provide financial flexibility for developers during these testing times.
CREDAI pointed out that currently, the total value of per square foot GST cost in India lies between Rs 360-500, varying from project to project. Hence, blocking ITC increases the construction cost, which has to be borne by the homebuyers and ultimately impacting their purchasing power and overall demand for homes.
It also added that the average housing rates across India range between Rs.4,000-Rs.4,500 per square foot, and the absence of ITC leads to an approximate increase in housing prices by Rs 400-450 per square foot. Also, 28% GST on cement diminishes the viability of many affordable housing projects.
Also, due to the increase in cement, steel, raw materials and services prices, the GST component on input and input services has gone up tremendously, and it is concluded that the ITC foregone is much more than the GST@ 12%. Thus, CREDAI urges to provide an opportunity to choose between GST@ 12% with ITC and GST@ 5% without ITC.
The CREDAI National President, Mr Harsh Vardhan Patodia, said that while GST implementation has been a complete game-changer for the entire economy, Indian real estate still requires specific tweaks and measures.
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DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.