How will including real estate under GST entirely help deal with uncertainties

By : 360 Realtors

10 July, 2019

The real estate sector has undergone some major changes in recent years. The inception of GST and RERA in real estate have been two of the most important aspects. Whether or not the real estate sector should be brought entirely under GST has been widely debated over the last few months. The existing incentives should also be revamped in the budget for individual homebuyers. Besides, it is necessary to look into the increment of the interest on home loans, which is presently fixed at INR 2 lakhs. These measures are expected to increase the demand for residential units across the country. The developers will also be able to liquidate. The inventory level of the properties that have already been completed.

It is considered that INR 2 lakh, which has been set as the limit of reduction of interest, is too low. It is actually not synchronized with the present capital values of the properties. In Budget 2019, one of the important announcements would be the inclusion of the entire real estate sector under the ambit of GST. This will help the real estate sector deal with all sorts of uncertainties, that are caused by different rulings and notifications in the recent past.

As a result of imposing the GST, the payable stamp duty on the sale of land agreements would be subsumed. Therefore, the Budget should be addressing this issue, that was created in January 2018 by notification. The aim of this notification is to transfer the tax on land development rights. This has already caused a lot of difficulties for the real estate developers and it should now be withdrawn.

Presently, the Central GST Act imposes a restriction on construction services, when it comes to the input tax credit. A direct link exists between the construction services that a commercial real estate developer receives and the activities like leasing and renting a space. The service provider who is engaged in renting should also be allowed to enjoy the credit of the tax that has been paid on construction costs.

The concept and regulations around REIT have already been in the real estate sector for some time now. Only recently, the listing of REIT has started. In case some open issues in the tax regime pertaining to REITs in the form of DDT (dividend distribution tax) exemption are considered and developers will have a greater potential in achieving the desired liquidity. Some of the reputed developers dealing with SEZs (Specials Economic Zones) would look forward to get an extension of the clause governing tax holiday sunset. The government should amend the tax law, as a part of the overall agenda in reviving the SEZs. These measures can strengthen the real estate economy in the coming years.