After facing strong criticism, is the Central government at last planning to bring to real estate under the Goods and Services Tax (GST)? We don't have a definite answer to that, but there has been some indication from the union finance minister.
Finance Minister Arun Jaitley is currently on a week-long tour to the US. While speaking at Harvard University on Thursday, he indicated that the real estate sector might be brought under the ambit of the new tax regime, Business Standard reported.
GST Council, in its next meeting in Guwahati in November, would consider bringing the sector under the new indirect tax regime, Jaitley said.
Economists and market analysts opined that real estate has seen the highest tax evasion among all the business sectors and need to be regulated in a structured manner.
"The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I believe that there is a strong case to bring real estate into the GST," BS quoted Jaitley as saying.
However, without the rate, it is difficult to understand how much the consumer will be benefited if the sector comes under GST taxation. Moreover, it is not just the rate, rules applicable under the service tax regime and the input tax credit facility for developers will determine if the move is beneficiary.
Nevertheless, with the real estate sector under the ambit of GST, consumers would pay one final tax on the whole product. And builders are expected to pass on the benefits to home buyers, which is expected to bring down the cost of the property.
"The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/installments ... It is advised to all builders/construction companies that in the flats under construction, they should not ask customers to pay a higher tax rate on installments to be received after imposition of GST," PropTiger reported quoting a government statement.
Jaitley while speaking on India's tax reforms, said, the taxation system in India one of the least efficient in the world with a very small tax base.
The new tax system was rolled out at midnight on July 1, which replaces a number of indirect taxes to bring in one comprehensive tax structure. At the present form, GST has five rates for different goods and services, although petroleum, real estate, and alcohol were kept out of its ambit.
The finance minister is scheduled to attend the annual meetings of the International Monetary Fund and the World Bank.
He also spoke on Aadhaar card. Taking cues from the recent Supreme Court judgment, he hinted that the government may make Aadhaar mandatory for buying a car and for booking international air tickets in the future.
While speaking at the university, Jaitley described the note ban exercise in November last as a fundamental reform necessary to make India a more tax-compliant society.
He added that the government is making systematic efforts to challenge the "shadow economy."