Alignment of GST and personal income tax to boost home ownership is an option that government may consider exercising in the upcoming Budget, said realtors.
Real estate developers are hoping that the government would rationalise the Goods and Services Tax slab for properties that are under construction and bring the stamp duty within the purview of the GST in the Interim Budget 2019.
Home buyers wish that the government would take steps for the creation of a stressed asset fund to deal with the issue of incomplete projects and provide an EMI holiday to those whose houses have been facing undue delays.
Abhishek Kumar of NEFOWA, a flat buyers' body active in NCR, said that government should set up a stressed asset fund to ensure that unfinished houses are finally completed and a tax holiday be provided to home buyers who have have been awaiting delivery of houses for over five years.
A high-powered committee, set up at the request of the Uttar Pradesh government, had last year suggested creation of a stressed asset fund to deal with incomplete projects where builders don’t have the resources to finish the projects.
Real estate body Naredco had said last week that the realty sector is undergoing a 'crisis situation' and demanded that the government should intervene by infusing Rs 2000 crore in a stressed asset fund to kick start construction in stuck housing projects.
Last year for the first time, home buyers had sent their wish list for Budget 2018 to the finance minister. Among other things, they had demanded that the government bring the entire real estate sector under the ambit of GST and ensure that builders pass on the benefit of input tax credit to buyers. They had also called for an amendment to the Insolvency and Bankruptcy Code 2016 and designating home buyers as 'primary secured creditors'. Those demands have so far been met.
Real estate developers on the other hand have called for rationalisation of GST on real estate. After GST implementation, GST on under construction properties has been fixed at 18 percent, with one third abatement for land, which works out 12 percent on the sale value. Abatement for land in Service Tax regime, before GST, was 70-75 percent of the property value, including land cost, and service tax was imposed only on 30-35 percent of the property value.
Developers argue that since land cost varies from cities to cities and in some cities it goes up to 80 percent of the total property value, it is unfair to restrict land abatement to 33 percent. It should either be the actual market value of land or at least 50 percent of the total property cost. Keeping extra burden on poor in view, GST on low cost houses up to 60 sq m carpet area, in an affordable housing project, which has been given infrastructure status, has already been brought down to 12 percent with one third abatement for land, which works out to 8 percent net.
It is suggested that the GST on under construction housing properties be brought down to 12 percent slab and land abatement increased to 50 percent. This will bring down the effective GST rate to 6 percent, which, after Income Tax Credit will become tax neutral for the end consumers, said eal estate body Naredco.
Naredco has suggested that stamp duty be brought under the purview of GST. Since GST in-compasses all taxes, Central and State, keeping stamp duty out of its purview increases total tax burden on consumers.
It has also suggested that rental housing be incentivised. Income from renting of housing properties be taxed at a flat rate of 10 percent and the cap on adjustment of interest deduction on computation of house property loss be removed to promote new housing stock.
"To improve the effective ROR from renting, it is suggested that the deduction from rental income under Section 24(a) be increased from 30 percent to 50 percent. This will promote rental housing. For handicapped, women and senior citizens, the deduction could be 100 percent, keeping social requirements and empowerment of women in view," it said.
The builders’ body is also hoping that the government would increase the limit of interest deduction paid on home loan, from 2 lakh to 3 lakh. Under Sec. 24(b), deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units. In case of owner occupied houses the limit is set at Rs 2 lakh. Also, the deduction is available after acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed.
"Boosting farm incomes and adding job opportunities are the twin tests for Union Budget 2019-20. Real estate and construction Industry fits into the Budget 2019-20 scheme as the second largest employer after agriculture and contributor of close to 10 per cent of GDP. Alignment of GST and personal income tax so as to boost home ownership is a strategic option that Government may well consider exercising," said Jaxay Shah, Credai national president.
According to Anshuman Magazine, chairman & CEO, India, South East Asia, Middle East & Africa, CBRE, in this year’s interim Budget, the sector has pinned hopes for clarity on the SEZ taxation, especially the sunset clause needs an extension, especially in wake of the anticipated impact of automation and technology on the IT sector. Withdrawal of any tax incentives from SEZs might hit exports and job creation.
Integrated townships ought to be encouraged. Tax benefits under Section 80-IA and Section 35AD (deductions to encourage private sector participation within the infrastructure sector) should be extended to integrated township projects by including the same within the definition of infrastructure facility.
He also called for incentivising affordable housing.
"While numerous initiatives have been taken to spur affordable housing, however some more developer related benefits such as additional FSI and tax benefits such as tax cuts on prefabricated structures could spur private interest in the segment," he said.
The co-working sector has called for reduction of the angel tax.
"One major challenge that still remains is the angel tax. Many start-ups face the heat of clearing this outstanding amount from the funds, which keeps them from trying their hands at innovation at a consistent pace. Also, in order to enrich the Indian market, the rate of corporate tax, which is currently at 33 percent, should be reduced significantly. Lower rates of corporate taxes are one of the major factors that attract businesses to overseas markets," said Sudep Singh, chief evengelista and CEO of GoWork.email@example.comThe Great Diwali Discount!
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