The Goods and Services Tax (GST) regime will be a game changer for the housing sector and 12% tax rate applicable on under-construction properties will bring down prices as developers will now decide to pass on the benefit of input tax credit (ITC) to homebuyers, said Hasmukh Adhia, Revenue Secretary, Ministry of Finance.
He was replying to grievances expressed by various stakeholders of trade/commerce/industry at the packed Town Hall meeting organised as part of the GST outreach programme on Tuesday.
Mr. Adhia allayed fears of entrepreneurs and traders and said the benefits arising out of ITC on raw materials such as steel, cement, bricks, iron used in the project would result in an overall neutral tax incidence for construction and benefit the builder who may then decide to pass it on to the buyer. However, ITC would be available for goods and services utilised in construction but GST regime would not subsume stamp duty and registration charges, he said. The service tax and value added tax (VAT) charges, currently payable on sale of under-construction properties, would be subsumed by the GST. Industry sources said that GST would subsume more than a dozen of major taxes and levies into a single GST.
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No postponement
Mr. Adhia ruled out postponement of GST implementation and said the country has potential to unleash an additional 4% GDP growth and higher growth rate would provide more jobs to the unemployed.
Noting that taxes on branded and unbranded textiles, branded and unbranded food products would be decided on the June 3-4 GST council meeting, the Revenue Secretary said GST rates of 28%, 18%, 12% and 5% were decided based on studying prevalent VAT, Central excise and sales taxes in various States.
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“There are many loopholes in the present tax structure. The GST is a level-playing field,” he said. Mr. Adhia said there was scope for rationalisation of taxes. At present, tax rates of 19% of items is fixed at 28%, 43% of items at 18%, and rest of the items below 18%.
Minister for Agriculture Krishna Byre Gowda, who is Karnataka’s representative at the GST Council, said the GST would overall reduce the tax rates in the country.
Lesser taxes sought on IP sets, sports items
Manufacturers of irrigation pumpsets, motorcycles and printers, and school bags and sports items have opposed fixation of GST rate at 28%.
Taxes on IP sets have increased from 5% to 28% and two and three-wheelers from 18% to 28%. Manufacturers of sports items said increase in tax rate from 5% to 28% would severely affect sporting activities of the middle class.
Zero tax on green coffee
Green coffee has been exempted from the GST, while the rate for roasted coffee is fixed at 5%. The GST rate on instant coffee is fixed at 28%.