After announcing rate cuts in Goods and Services Tax of under construction building projects, the GST Council meeting on March 19 would deliberate on how to set out a transition for builders facing the new tax regime that has been put in place for them. This would include a decision on the fate of input tax credit (ITC) which is allowed as a discount on payment of GST on other goods, supplies and services availed by builders as well.
“As of today, the meeting is likely to happen. The Election Commission is deliberating on whether the GST Council meeting could still be held,” said Ajay Bhushan Pandey, revenue secretary. Earlier, objections were raised by some states if the GST Council meeting could be held at a time when the poll code of conduct is in place.
By Wednesday afternoon, the Election Commission of India (ECI) gave its nod for holding the GST Council meeting. However, this one to be chaired by Union Finance Minister Arun Jaitley for the first time after resuming charge as minister, would in all likelihood be a short one.
According to finance ministry officials, Jaitley is likely to conduct the GST Council meeting over video conference from the North Block. The ECI, while giving its go-ahead for the meeting, also limited its agenda for discussion to deal only with transition provision and related issues for the implementation of lower GST rates for the real estate sector.
Currently, the GST is levied at 12 per cent with an ITC allowed to builders, on tax payments made for under construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale.
The law review committee and the fitment committee under the GST Council deliberated on setting up the guidelines for taxpayers after the rates on under construction houses were slashed in the last Council meeting on February 24.
These guidelines are likely to be taken up for discussion by the state finance ministers during the meeting this time. Among these, an important issue is on deciding to what extent builders can avail their input tax credits, after the Council announced that from April 1 no tax credits would accrue for them.
Some of the suggestions that have been placed include allowing partial tax credits to builders, depending on the extent to which their projects have been completed. However, confusions remain as to who will be auditing the progress for these projects and how previous unpaid tax credits would be adjusted.
Abolishing input tax credit is likely to channelise black money back into the system by builders for housing projects. The committees are said to have gone ahead with the mandatory requirement for builders to procure 80 per cent of their inputs from registered dealers in the formal sector.
GST collections in February dropped to Rs 97,247 crore from Rs 1.02 lakh crore in the previous month. Of this, Central GST was Rs 17,626 crore, State GST (SGST) stood at Rs 24,192 crore, Integrated GST Rs 46,953 crore and cess was Rs 8,476 crore, a finance ministry note said.
GST collections in the current fiscal till February totalled Rs 10.70 lakh crore. Collection targets for the current fiscal were earlier lowered by the government to Rs 11.47 lakh crore, from Rs 13.71 lakh crore budgeted initially.
Speaking to THE WEEK a number of builders expressed that the decisions taken at the GST Council meeting could make or break it for many small housing developers. Some of the larger ones are also expected to hike their unit prices, as not availing the input tax credits are likely to push up their tax bill. This tax burden would finally be passed on to consumer prices of housing units going ahead.
Source : PTI