Venkateswaran TR - Partner - Price Waterhouse & Co LLP shared his perspective, “The real-estate industry has moved from various types of taxes such as VAT, Excise, Construction Cess, Service tax etc. that used to create inefficiencies to a GST regime which makes the process simple.”
Parveen Mahtani- Chief Legal Officer, Mahindra Lifespace Developers Ltd stated, “GST has significantly reduced the cost for developers, but there are issues around the input tax credit. It involves number of calculations, ambiguity on when to avail it and other difficulties in getting the credits.”
Rocky Israni- Managing Director, Pacifica Companies (India) added, “The top tier developers are able to deal better with GST laws but, smaller developers because of the compliances costs are finding it difficult to meet the criteria.”
Achal Chawla, Partner, Indirect Taxes, Ernst & Young LLP shared, “From clarity point of view GST is a boon. From cost perspective, the service tax clubbed with VAT and Service Tax, the overall tax would come around 6.5 to 7% and GST from that perspective and considering the credit side as well, is 5%. There is saving and some project owners have passed on the benefits to customers as well.”
Ajinkya Gunjan Mishra, Partner, S&R Associates said that the one of the primary ideas of GST was to remove the inefficiencies from the supply chain but uncertainties in input tax credit claiming takes away the whole concept of GST of removing inefficiency. While 5% GST in itself may look attractive, but with high GST on construction materials, getting added to the cost, it does not really help the home buyers.”
Koshal Agarwal, Partner- Tax and Regulatory Services, BSR & Company added, “For someone planning a construction, the plant or machinery get GST benefit but again the definition of plant and machinery becomes a contentious issue.”
Gaurav Dasgupta, Partner, Real Estate, Corporate & Commercial, Khaitan & Co gave an example, “The Orissa High Court in the Safari Retreat case has allowed the input tax credit on the construction of immovable property for rent. It is a welcome judgement in sync with the objective of GST. The ruling is futuristic, but unfortunately letter of the law does not support it.”
Rocky Israni pointed out, “The GST laws are still evolving with various amendments getting introduced. This creates a lot of confusion for the developers in compliances and availing benefits.”
Parveen Mahtani concurred, “The issue with ITC is lack of openness and the disadvantage is the complex process of calculating ITC, which causes many a deals to fall through.”
Achal Chawla agreed, “There is a lack of clarity on ITC with regards to what constitutes plant & machinery, the cost of repair and renovation and the structuring of contract for the construction. Advertising, leasing, auditing services, professional services, consultant services do not get covered under the ITC provisions.”
Venkateswaran TR added, “In GST provisions, one third of the value of the property is deemed to be the value of land transferred to the buyer, irrespective of the actual value of land and accordingly, exempt from GST. This disregards the huge variation of value of land across the country.”
Ajinkya Gunjan Mishra said, “Land per se is outside the GST net. Constitutionally that is the subject area of the State Government. By the way of delegated legislation, it has come with a deeming fiction which says 1/3rd will be the value of land. Most of land in metros far exceeds 1/3rd value.”
Gaurav Dasgupta added, “In case of Transfer of Development Rights (TDR), it is a benefit arising out of land and must be held to be an immovable property thus excluded from GST should be the correct view.”
Koshal Agarwal concluded that the GST should have a single language and a uniform interpretation. "GST has in many ways streamlined the real estate transactions, however there are some painful areas that need to be addressed.”
GST PROBLEMSITC reversal computations made at the time of receipt of completion certificate, increases the compliance burden on the developers.
Deemed deduction of one-third from value of property in all cases is not viable and should be appropriately addressed by the Government.
There has been a debate whether charges for additional facilities can be clubbed with value of property and chargeable at GST rate applicable on sale of property.