CREDAI urges govt to allow input tax credit for developers

CREDAI, a real estate developer, has asked that input tax credit (ITC) below the goods and service tax (GST) administration must be allowed to developers. As it could lead to a decrease in housing prices by 10%. CREDAI, with more than 13,000 developers, requested the Central Government to expedite the ITC for real estate developers under the composite scheme of GST. Without the ITC on ongoing constructing flats, there is a GST of 5%. On affordable housing, the GST is 1% without ITC, and zero GST is required on completed units. CREDAI asked the government to permit developers to select between a 12% GST rate including ITC (assessment scheme) or 5% GST rate without ITC (composition scheme), giving them financial flexibility throughout these times. Under the existing composition scheme, the inability of developers to avail of ITC is severely affecting construction prices and housing costs. According to the association, at present, the overall value of per square foot GST price in India is between Rs 360-500, differing from project to project. Owing to the prevailing scheme, it results in a proportionate rise in the construction price. It is eventually borne by the homebuyers, affecting their purchasing power and demand for homes. The absence of ITC leads to an increase in housing prices by nearly Rs 400-450 per sq foot, considering the average housing prices over India ranging between Rs 4,000-4,5000 per sq ft. The association also revealed that 28% GST on cement reduces the viability of several affordable housing projects. Anuj Puri, Anarock Chairman, said that it would be beneficial for both developers and buyers if the ITC profit is included in the current 5% GST rates. Otherwise, the government should decrease GST rates on steel and cement. Atul Banshal, CFO of Experion Developers, said the GST is an indirect tax and it is always a pass-through, and dismissing the same has only resulted in an increased price for buyers. Vivek Jalan, Partner, Tax Connect Advisory Services, revealed that from April 1, 2019, ITC is not available to the recipient of the housing unit for the construction of a residential apartment. A few significant raw materials like cement are taxed at 28%, and need to be around 12-18%. Image Source Also read: Govt provides relief in GST timelines to businesses hit by Covid-19 Also read: Real estate developers fear project delays due to Covid-19: CREDAI