Bengal FM Amit Mitra warns of GST hit on homes
Mitra suggests the new GST regime to be made mandatory only for housing projects that come up after April 1, 2019
- Published 19.03.19, 1:23 AM
- Updated 19.03.19, 1:23 AM
- a min read
Bengal finance minister Amit Mitra has sought to protect small home buyers from the potential shock of price rise following the rejig in GST rates in residential real estate.
Mitra wants the new regime to be made mandatory only for housing projects that come up after April 1, 2019.
Mitra shot off a letter to Union finance minister Arun Jaitley a day before the meeting of the GST Council, which will decide on the modalities of the transition of GST rates for under-construction residential real estate.
The Council had last month decided to lower the rate on under-construction residential properties to 5 per cent from 12 per cent and on under-construction affordable houses to 1 per cent from 8 per cent.
Mitra suggested that migration to the new tax regime be made voluntary for ongoing projects as “the mechanism proposed (by the Council) for the allowance and reversal of credit for ongoing projects is highly cumbersome and mind boggling”.
According to the formula suggested in the draft rule circulated among Council members, a lot of discretion would be left with the tax authorities and “may encourage rent seeking”, Mitra wrote.
Illustrating that “the consumer will end up actually paying more” as the “cost of the ongoing project immediately” for reversal of input tax credit, Mitra wrote: “Therefore, I suggest that the scheme should be made optional for ongoing projects and may be made mandatory for new projects coming up on or after April 1, 2019”.
Sources in Delhi said the Council was likely to work out a formula to allow builders to take advantage of the tax credits on their books. Policymakers want to give relief to builders to the extent possible as unused credit will either push up the cost of property or impact the bottomline of the builders, officials said.
The new rules are expected to specify under what circumstances sales initiated in the current tax regime but concluded after April 1 will be eligible for input tax credit on the taxes paid on raw materials and services, they added.