NEW DELHI: The government should allow real estate developers to set off GST paid on inputs under the composite scheme of the Goods and Services Tax (GST) to boost demand, developers’ body CREDAI said in its recommendation to the finance ministry, ahead of the crucial GST Council meeting that is likely to meet in August.
The inability of developers to avail input tax credit (ITC) is adversely impacting construction costs and higher property prices are scaring buyers away. According to Credai, which has over 13,000 members, disallowance of credit leads not just to increased cost of construction, but working capital loss and increased financing costs, thus impacting the entire supply chain.
“Owing to the prevailing exorbitant construction costs, we strongly believe that such a move could rationalise housing prices by 10% and spur the supply of affordable housing projects across Tier I markets,” the developers’ association said in a statement. Currently, there is 5% GST without ITC on under-construction flats. On affordable housing, the GST is 1% without ITC. No GST is charged on completed units.