The government’s push for affordable housing in the country will take a big hit, thanks to higher rate of indirect tax under the GST regime, say builders.
“Currently, the end user is taxed at around six per cent but once the GST is rolled out the taxes would jump to around 20 per cent,” said Mr S. Ram Reddy, the president of CREDAI Hyderabad.
He was speaking at an event to announce the 5th CREDAI Hyderabad Prop-erty Show from August 13.
The new tax regime would wreak havoc for the developers too as the basic items in constructions are likely to become dearer, while denying that businessmen are hiking the prices.
“While there will be a decline in cement prices, it would be negligible considering the rise in the prices of steel. The basic cost of constructions is expected to rise by about eight per cent,” he said.
Neha Hiranandani, the director of the Hirana-ndani Group, too echoed the same concerns.
“Since GST will be applicable on the materials purchased by the developer to construct the project, it will have a direct impact on the total costing of the project. The GST Bill treats construction activities as “work contracts” but is silent about guidelines on valuation of land and has kept the sector away from input tax credit. This could mean higher costs for the end consumer,” she said.
According to Ms Hirana-ndani, the implementation of the GST will not subsume the stamp duty levied by the states, who may increase it from time to time to meet revenue targets thereby pushing costs higher for the buyer.
According to her, it would be important to see what the final Goods and Services Tax rate would be because if the rate is higher than the existing cumulative taxes, it will certainly be dampener as it will increase the final cost for buying an under construction flat and defeat the purpose of the GST Bill.
