The changes were effected after builders urged the government to consider accommodating the abatement of land value under the GST regime to ensure home prices don’t rise.
The GST Council had in its meeting in May decided to levy 12 percent GST on construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. The value of land was to be included in the amount on which tax was to be calculated.
However, this latest notification has left developers more confused.
“This has been done to avoid future litigation as Centre does not have powers to impose GST on land. Abatement of land with an increase in GST rate has led to more confusion among all stakeholders as we will have to rework on softwares and there is only one day left,” said Rajat Kalra, deputy general m,anager (accounts), Raheja Developers.
Pankaj Bajaj, managing director at Eldeco Infrastructure & Properties Ltd., said that the customer will eventually bear the brunt of this.
“Land rates are drastically different in different locations. Lokhandwala and Lucknow are not the same. It is a ‘one size fits all’ solution, and ultimately. the customer will bear the cost,” said Bajaj.
"The GST rate on our industry remains unchanged at 12 percent. Any conjecture or speculation of a change in incidence of tax on real estate to a rate other than 12 percent is unwarranted," said Jaxay Shah, President, CREDAI.
Industry body Confederation of Real Estate Developers Associations of India (CREDAI) that one-third or 33 percent land abatement is not enough.
“A 33 percent mandatory abatement towards land is not enough. It will not give substantial gains to projects in localities where land value is almost 80-90% of the unit value. This may include all tier 1 cities. Hence, for a substantial growth of the industry which is the second largest contributor to the GDP, we urge the GST council to consider providing a mechanism for reducing the value of land," he added.