(G)overnment (S)implifies (T)axation

 In a decision that will bring about clarity, transparency and uniformity towards taxation in the country, the much discussed and long pending Goods and Services Tax (GST) bill has been given a go ahead by the upper house of the Parliament. This bill was already passed through the Lok Sabha, and now with the Rajya Sabha passing it, a majority of states will have to approve the constitutional amendments then the Parliament will need to pass another bill to implement the tax, before the Presidential signatures come in and form it into an Act. Finally, a council for GST will be formed which will comprise of state and federal officials who will decide the final rate which may vary for different goods. GST, which will replace the several existing local and state taxes with a single tax, is anticipated to largely benefit the real estate sector of India. After its implementation, it will replace the current indirect taxes such as service tax and VAT along with other multiple taxes like CST, excise duty, etc.; which will greatly reduce the burden from the developers, the benefit of which will be passed on to the buyers of this sector. This in turn will help the demand to grow back and allow developers to score better in the sector. This effect will be visible soon on the economy as GDP will get a better contribution from the realty sector.

Manoj Gaur, President CREDAI-NCR & MD, Gaursons India Ltd. said, “The wait for a uniform tax structure in the country is finally over and real estate sector amongst others will benefit largely. A well-defined GST implemented for the country will bring about a relief for this sector and its customers. Commercial realty players will be hugely benefitted as all the lost Cenvat credit, which is in current regime a cost to commercial developer can be availed if GST is applied in a free flow manner that will also help in reducing costs. A much simplified single tax rate, reduced construction costs and better transparency in the sector will be much welcomed by the developers and its customers.”

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz said, “GST is finally a reality now and the nation will soon witness its benefits, with real estate sector to make the most out of it. Implementation of GST will basically work on three major elements for this sector; simplification of tax structure, reduction in construction costs and better transparency. Speaking about its contribution post acceptance, we are predicting a nationwide realty sector growth by almost 15-20 percent than projected in the course of next 5-7 years. There will be a quick reaction towards the sector by its customers as demand is bound to increase due to reducing costs and improving transparency in the sector that has been the hurdle making this sector suffer for long now.”

Till now, the central and state governments levied various kinds of taxes for land, property and other kinds of work contracts with the transactions mainly categorised in three parts- value of goods and materials, value of services and value of land. Also, there is a levy by the state governments through VAT on the goods, but at the same time, several states such as U.P. does not charge this. This levy is not clearly defined in certain states, where Haryana is an example. The biggest benefit that GST shall provide will be, the reduction in under-construction properties. With a single tax regime, developers will get free input credits on GST paid for services and material purchased by them. If we move forth with the views of the industry experts, GST may boost the GDP growth of the country by 1.5-2 percent. Dhiraj Jain, Director, Mahagun Group avers, “Currently, the homebuyers of this sector are under the pressure of two forms of taxes; service tax and VAT on the purchase of residential units when booked prior to its completion. There are numerous components of non-creditable tax costs such as CST, entry tax, customs duty, excise duty, etc. which is duly paid by the developer on its procurement side which are basically ingredients for the cost pricing of the units. With the GST now, a single tax structure will be followed which will allow reduction in costs for under-construction units. Developers as well as the buyers will make the most of this as reduced costs will positively impact the sentiments as well as demand for property.”

Although, there is a slight catch and a flip side to GST as well. If the GST is implemented on a higher rate, then the cost of under-construction properties will shoot up. If the rate is higher than the applicable service tax, which at present is 15 percent, this can turn out to be a dampener for the buyers as they will end up shelling out extra amount. Also, states where VAT is not applicable till now then GST will be charged. Thus, only if the GST rate is lower than 15 percent, we can forecast a better real estate scenario in future. “There is no doubt that multiplication of taxes will be curbed through GST, but the only question will be, what rate gets decided. The only dampener for this sector can be high GST rates, if above 15 percent gets decided; this will counterpoise any possible gains on incremental credits. Also, stamp duty is not proposed to be incorporated under GST and will thus continue to remain as it is at present. Therefore, decreased cost of construction will take place once a lower bracket of GST is applied as the developers will be liable to pay much less than today, thereby allowing cost of units to fall which will directly benefit the end users”, explains Vikas Bhasin, MD, Saya Group. Adding further, Vaibhav Jain, CMD, Rise Group states, “These are still early days to judge how much will the GST benefit real estate sector. There is a strong dependency on the allied industries such as steel, cement, IT and BFSI. A lowered GST rate, below 15 percent, will offer a huge benefit for the sector as not only will the cost of construction get curtailed, but there will be direct benefit while registering the properties as well. Also, there are developers and builders who are developing projects in different states or regions, specially tier 2 cities and thus have to abide by the state specific VAT laws, service tax and corresponding compliances. The presence of several indirect tax components faced by the developers at present are a major cause that bring tax inefficiency in this sector. A simplified tax structure would also mean that property prices would come down considerably enabling better affordability for people looking for property options in tier 2 and 3 cities.”

“With the dawn of concepts like hustling in service tax coupled with reductions and various mandatory charges collected by developers these days, highlights the importance of having a same tax base which can be only answered by GST. A single tax rate across the country will promote fair practices which will further encourage transparency and less evasion in the sector that supports in future growth of demand for real estate. GST will definitely prove to be a game changer for the Indian economy and provide a stimulus to the ‘Make In India’ initiative”, concludes Ashok Gupta, CMD, Ajnara India Ltd.

Lok Sabha also passes GST Bill; PM Modi says it will end tax terrorism

The GST will make consumer the "king", thanking all parties for their support to the Bill.

NEW DELHI: The long-delayed GST Constitution bill was passed by Parliament on Monday, marking a Prime Minister Narendra Modi said GST was "crucial" for ending tax terrorism besides reducing corruption and black money.

The GST will make consumer the "king", thanking all parties for their support to the Bill.

The Constitution (122nd Amendment) Bill, which was passed by the Lok Sabha in May 2015, was taken up again by the Lower House to approve the changes made in it by the Rajya Sabha last week.

The government had moved six official amendments, including scrapping of 1 per cent additional tax, to the bill which were approved by the Upper House.

After a six-hour debate, the Lower House passed the bill with all the 443 members present voting in favour after AIADMK members staged a walkout while opposing the measure.

While intervening in the debate, said the passage of the Bill reflected "maturity" of the Indian democracy as such a crucial legislation was approved with consensus rather than on the basis of numbers.

He hailed it as a "great step by team India" that will help transform the economy, bring in transparency and bring in the system of "one country one tax".

He emphasised that the passage of the bill by Parliament was not a victory of any party or government but was everybody's victory as it highlighted the success of the democratic ethos of the country.

Jaitley, while replying to the debate, said the tax rate under the GST regime will be kept at "minimum workable rate" as no state government can annoy its people by having a higher rate. He said the rate will be decided by the GST Council.

He, however, virtually ruled out an assurance that the GST legislation will not be brought as Money Bill, a key demand of opposition Congress.

The bill will now have to be ratified by at least 16 of the 29 state assemblies, which the Prime Minister hoped would be done at the earliest.

"A memorable day for our democracy. Today we have taken a historic step in the journey to free the nation from the menace of tax terrorism," the Prime Minister tweeted later.

"GST will benefit the consumer and small business, which are our nation's strength. Due to GST transparency will be enhanced. Its a win-win," he added.

Describing the passage of the bill as victory of democracy, Modi, while speaking in Lok Sabha, coined the GST in a new manner -- 'Great Step by Team India', 'Great Step towards Transformation', 'Great Step towards Transparency'.

Noting that the GST bill had been firmed up after thorough "churning of ideas", he expressed happiness that it was being passed through an unprecedented consensus.

Modi said he had held consultations with his predecessor Manmohan Singh and Congress president Sonia Gandhi on the issue, giving equal importance to Rajya Sabha and Lok Sabha.

"Rashtra Niti (national interest) is above Raj Niti (politics)," he said, adding GST will prove to be a catalyst in strengthening trust between the Centre and the states as everything will be transparent.

"I thank all political parties, as also state governments run by different parties. We are taking such a decision ... we have reached here after churning in Lok Sabha, Rajya Sabha, 29 states, their representatives and 90 parties. We are putting a stamp on the final decision," he said.

Underlining that the development marks the "recognition of One India" and strengthens this concept, he said, "We are aligning ourselves with new taxation regime .... GST is a new 'moti' (bead) in this 'maala' (necklace)."

He said his government's focus is economic and educational empowerment of the poor and mitigation of poverty.

Modi asserted that the GST will benefit mainly those states which are considered backward and address the problem of imbalanced development.

He acknowledged that manufacturing states will suffer losses but said they will be compensated.

"August 8th marks a crucial step towards freedom from tax terrorism," the Prime Minister said, while recalling that this was the day in 1942 when Mahatma Gandhi had sounded the bugle of 'Quit India' which marked a major step towards the country's Independence.

"GST can't be seen as a victory of a party or government. It is the victory for democratic ethos of India and a victory for everyone," he said, while noting that the measure was being supported by all parties, irrespective of different ideologies.

The Prime Minister said the new indirect taxation regime, which will subsume 7-13 taxes, will help end corruption as traders will be compelled to give proper bills and the consumer will be the "king".

It will also help reduce the problem of black money and lead to generation of jobs by benefitting the small traders and entrepreneurs, he said.

Talking about benefits of GST, Modi said it will usher in simplification of procedures like filling of forms and bring about uniforminity of tax rates and processing.

Responding to Congress' contention that GST was its idea being implemented by the NDA government, the Prime Minister acknowledged that all political parties and previous governments had contributed to making of the bill.

In this context, he quipped, "janam koi de, lalan palan koi kare. Krishna ko janam kisne diya, bada kisne kiya? (somebody may give birth, but someone else may nurture. Who gave birth to Lord Krishna and who brought him up?)"

At the same time, Modi said, "we do not have 'guroor' (arrogance) that his bill is the perfect one" even though "so many brains have made an effort which will have results".

"It (making of GST) is a result of churning but it is true that we cannot be perfect and it cannot be ensured that in future there would not be any drawback," he said.

Underlining that everyone dreams for "Ek Bharat Shreshtra Bharat' (One India, Great India)," he said, "this is not just a taxation system but all states and the Centre will develop a system where small or big accept it."

He expressed happiness that GST bill was not allowed to be politicised and rather became a national matter.

Rahul welcomes passage of GST Bill

Congress vice-president Rahul Gandhi said the passage of the Goods and Services Tax (GST) constitutional amendment bill is a good step for the country.

"I think it is a good step for the country," Gandhi told reporters after the Lok Sabha unanimously passed the 122nd constitutional amendment bill, paving way for the implementation of the GST.

He further said the differences over the GST between the government and the Congress have narrowed down but the issue of 18 per cent cap is worrisome as it concerns inflation.

"We had earlier three major differences on the GST. We worked out the differences. There is one issue which is the 18 per cent issue and we feel that it is a very important issue. Because we are worried about inflation resulting from no cap. So now that's discussion (will be) in December," he said.

The constitutional amendment bill is an enabling legislation and the government will come out with a CGST and IGST Bill in the Winter Session of Parliament for implementing new tax regime which will subsume various indirect taxes.

Source: ETRealty

Builders' body Credai to meet FM on GST

Arguing the former case, builders point out that properties are immovable assets and not service.

SHANGHAI: Confederation of Real Estate Developers Association of India (Credai), an umbrella body of leading Indian builders, has sought a meeting with finance minister Arun Jaitley to get clarity on the incidence of Goods and Services Tax (GST) on the industry. Developers want the sector to be either kept outside the purview of GST like petroleum, liquor and tobacco or offset the GST that is levied during construction against the tax paid by buyers.

Arguing the former case, builders point out that properties are immovable assets and not service. "Also, if GST is levied on the sector along with stamp duty and registration fee, it will push prices up by 18%, taking the overall tax to 23%. That will be a killer blow for affordable housing," said Credai national president Getamber Anand.

He was voicing the industry's concern at Natcon 2016, the annual convention of Credai that was hosted in Shanghai by the Bengal chapter from August 3 to 5.

The passage of GST bill in Parliament, viewed among one of the most significant legislation since Independence, has led to a lot of euphoria with India Inc hailing the unified tax structure. But the real estate industry's concern stems from the fear of a possible double taxation on transactions made in under-construction properties.

"If developers don't get input credit, the cost will be passed on to customers. That will increase cost and constrict demand further. We have to study the fine print and are in the process of engaging top tax professionals to advise us before we take it up with the finance ministry," said Credai national vice-president Harsh Vardhan Patodia.

The levy of service charge on under-construction flats has already been challenged in Delhi high court. The petitioners have argued that if stamp duty is being paid on the basis of it being an immovable asset, how can a service tax be levied. The court has sought a clarification on the matter.

Incidentally, service tax was not applicable on affordable housing of 30 sq metre in metro cities and 60 sq metre in non metros.

Credai officials also want stamp duty to be rationalized to provide a much-needed growth impetus to the sector and meet the demand shortage. "Stamp duty should be 2% for low cost housing (less than Rs 50 lakh) and 5% for the rest. Only then can we meet the demand target of 6 crore houses," said Credai chairman Irfan Razack.

At present, stamp duty varies from 5% in Maharashtra to 13% in Kerala. In Bengal, stamp duty and registration together amounts to 8.1%. "The fallout of the global recession of 2008 continues to plague the industry. There is a need for special measures to give the sector the desired impetus. Rationalizing duties and taxes will be of great help," said Credai Bengal president Sushil Mohta.

GST: Under-construction flats to cost more by 5-10%

Prices of under-construction apartments may rise by up to 5-10% when the Goods and Services Tax (GST) is rolled out. But, prices of completed apartments will not be affected as GST will not be applicable there.

If you have already bought a flat but the entire payment has not been made, you will be charged tax at the GST rate on the remaining amount to be paid, which is likely to be between 12% and 18%.

Amit Kumar Sarkar, partner in tax consultancy firm Grant Thornton, said the rise in prices will be due to an increase in the net tax incidence for apartments under construction.

In the new tax regime, if one books an apartment which is under construction, the cost of the apartment will be treated as value of services that the developer is going to deliver to you and will be taxed at the prevailing GST rate.

Under the present regime, under-construction apartments are treated as work contracts in which the land, goods such as cement and steel, and services are involved. Therefore, to tax its services portion only, an abatement of 60% of the total cost is allowed.

So, the net service tax liability is calculated at 15% on 40% of the total cost, which works out to be 6% of total cost. Besides this, a buyer also has to pay 1% VAT (value-added tax).

Pratik Jain, leader of indirect tax with consultancy firm PwC, said in the suggested framework of GST, work contracts as well as sales of under-construction apartments are treated as a service. The problem arises as no abatement is allowed in lieu of land and other commodities such as steel, cement and sand used for the construction.

Now, if the GST rate is fixed at 12%, the net tax incidence will increase by around 6% from the earlier level. But if the rate is fixed at 18%, the rise would be by around 12%.

The problem got compounded as stamp duty, which is levied by the local state government on the registration of the property, has not been subsumed in GST. Therefore, over and above service tax, the buyer will have also to pay a stamp duty of 5-8% in different states.

Credai president Getambar Anand said as stamp duty is levied on the real estate, the sector should be treated separately and abatement should be allowed to calculate GST, so that the net tax incidence does not rise.

SOURCE: ETRealty.com

Rajya Sabha Passes GST Bill

New Delhi: In a significant development, the Rajya Sabha passed the Constitution (122nd Amendment) (GST) Bill, 2014 today evening unanimously. It is being reported that the Bill got 203 Ayes against NIL Noes. The Lok Sabha had already passed the Bill in May, 2015. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. Read more about GST here. Moving the Bill in Rajya Sabha, Finance Minister Arun Jaitley said: “the whole concept of the GST Council is, Indian federalism at play in the best possible mode. Two-third of the voting power, in the GST Council, would belong to the States, and one third of the voting power, in the GST Council, would belong to the Centre. The votes required to settle a particular issue are three-fourths and therefore, necessarily, the GST Council has to work, particularly, under a consensus and, therefore, the Centre and the States will have to work together. The Centre will have a veto on the States; the States will have a veto on the Centre. Therefore, this would be federalism at play, under which the GST Council itself, would then be able to take its decisions. Sir, the whole object is that after this Constitution Amendment is approved and ratified by the States, the Council would come into existence.” The Finance Minister added that, this is one of the most significant tax reforms in India in recent history and this reform has been debated within the political and economic system of India for the last almost over 15 years. On behalf of opposition, Former Finance Minister P. Chidambaram said: “I want an assurance from the Finance Minister. This is far too important legislation which will last for the next 100 years. Not to hide behind any technical arguments, I want an assurance from the Leader of the House, the hon. Finance Minister, my good friend and fellow lawyer that when that Bill is brought, it will be brought as a Financial Bill and not as a Money Bill. Therefore, both the Houses will debate on both. Too many Bills have swept through the cracks as Money Bill. It has been challenged in the Supreme Court by one of our distinguished colleagues here and let us see what the outcome is. But this is far too transformative, far too revolutionary a legislation that one House will vote and the other House will speak. I think, both the Houses must debate it. Both the Houses must be allowed to vote and this is something within the power of the Government to say, ‘yes, we will introduce the CGST Bill and the IGST Bill as Financial Bills and both the Houses will debate, both the Houses will vote’, and I ask the Finance Minister that assurance, and, I say, after the debate, my Party will support this Bill, but we require assurances from the Finance Minister.” The opposition has also demanded that the standard rate of GST which applies to most of the goods and services, over 70 per cent of goods and services, should not exceed 18 per cent and the lower rate and the demerit rate can be worked on that 18 per cent.

NGT meet to check STP plan growth

The National Green Tribunal has summoned officials from Delhi Jal Board (DJB), Delhi Development Authority (DDA), ministry of water resources (MoWR) and other stakeholders for a "chamber meeting" on August 3.

The meeting aims to resolve issues related to the funding of a decentralised sewage treatment plan in the city to be implemented by DJB. The tribunal had last year ordered the implementation of a widespread decentralised sewage treatment plan under its "Mailey se Nirmal Yamuna revitalisation project 2017."

At present, even phase 1 of the project is yet to take off because of a disagreement between DJB and the Centre on the mode of payment of more than Rs 1,000 crores. According to lawyers representing the Centre, the ministry agreed to pay the amount through annuity mode and not at once. Annuity mode is a method of disbursing a certain amount based on annual appraisal of the project. Central Pollution Control Board (CPCB) had recently questioned DJB's plan of building new plants and instead called for the optimum use of the existing STPs.

NGT on August 3, is likely to arrive at a decision on the mode of payment for the project.

Source: magicbricks.com

Builders blame lengthy procedure of revised permission

The illegal practice of realtors adding floors to high-rises anticipating post-construction permission from Pune Municipal Corporation is 'routine' in the city, thanks to mutual understanding between developers and civic body officials.


The Pune Municipal Corporation (PMC) can slap stop-work notice to developers adding floors when the sanction process for the revised plan is on. But the civic officials stressed that they did not have enough manpower to monitor each and every construction site.


A civic official admitted that the building permission department had just 30 people, burdened with responsibilities of checking constructions, replying to RTIs, sanctioning permissions and what not.


"With 30 people, we cannot keep watch on everything. Developers, architects and contractors are responsible for adding floors without permission. Every time one cannot blame PMC, handicapped without manpower," he said.


When asked why does a builder go ahead with the construction at a time when the sanction is under process, Jaiprakash P Shroff, the chairman of Kushal, said, "This question on timing is individualistic. The builder must wait for final permission. But sometimes it takes up to four months to get it. Sometimes the officer goes on leave and informs us that the permission will come through. So, the builder thinks since it is just a formality and within the rules, there is no harm in going ahead with it."


Kushal is a partnership project between Credai Pune Metro and National Skill Development Corporation. The programme was conceived to improve the construction workforce's skills.

Shroff said builders go for additional floors because they have allowable floor space index (FSI)/Transfer of Development Right under different rules.


"At times, they (builders) don't realize all of it up front. When they realize it, as is the case with every businessman, he/she tries to make the maximum out of every opportunity. I don't see any other reason for it. In fact, building beyond a certain floor height is an incremental cost for the builder. Unless it makes economic sense, he won't do that," he added.

SOURCE: TIMES OF INDIA