Developers' body requests Centre to restructure GST on MMR redevelopment projects

CREDAI National President Boman Irani, along with a delegation of members from CREDAI MCHI, met and made a formal representation to Finance Minister Nirmala Sitharaman.

The Confederation of Real Estate Developers' Associations of India (CREDAI)-Maharashtra Chamber of Housing Industry (MCHI), the apex body of developers in Mumbai, have requested the central government to restructure the Goods and Services Tax (GST) levy to ensure the viability of redevelopment projects in the Mumbai Metropolitan Region (MMR).

"The developers’ body has requested no GST charge on rehab flats, given free of cost to existing occupants in redevelopment projects,” CREDAI-MCHI said in a statement released on June 1.

CREDAI National President Boman Irani, along with a delegation of members from CREDAI MCHI, met and made a formal representation to Finance Minister Nirmala Sitharaman recently and expressed concern over the impact of GST being levied on redevelopment projects/ rehab flats which are being built and given back, free of cost, to existing occupants, the statement said.

According to CREDAI-MCHI, currently, new houses to existing occupants/tenants/flat owners/slum dwellers (output service) and sale of flats/shops/offices (sale component) in the open market are being viewed as separate transactions, leading to higher tax obligations.

CREDAI put forth multiple arguments to restructure the GST provisions for a more conducive eco-system for redevelopment projects.

In effect, 10 percent GST is currently being charged on flats (5 percent on rehab and 5 percent on sale, both borne ultimately by consumers) being sold from the sale component.

“Where projects are able to absorb the additional GST burden, the eventual customers of sale component are the ultimate sufferers as the cost of their flat increases, and where the projects are unable to absorb the additional cost put by GST on rehab at notional valuations, the existing tenants/flat owners/slum dwellers are the ultimate sufferers as their project never takes off and they are relegated to sub-human living conditions,” the statement said.

A conducive redevelopment eco-system is required for the MMR to fully realise its potential, as there are numerous dilapidated buildings with roughly 50 percent of population still residing in the slums or old, dilapidated buildings.

While the government has taken measures to promote more redevelopment projects, there is a need to course-correct certain aspects from a regulatory and taxation standpoint that will not only help enhance the holistic economic value but also facilitate both demand and supply for such projects, said Irani.