The GST Council scheduled to meet on March 19, may restrict the use of tax credits accumulated by builders and allow a concessional rate for up to 10% of commercial property, such as shops, in residential complexes, expecting developers to pare prices.
At the last meeting, the council had agreed to reduce the levy on under-construction residential projects to 5% without input tax credit (ITC) from the current 12%, with credit for taxes paid on inputs such as paints, steel, cement and sanitary ware. For affordable housing projects, the rate will be slashed to 1% without ITC from 8% with tax credit. However the modalities for the rate reduction are yet to be worked out. According to sources,officials were in favour of accepting the recommendations of a ministerial panel, which had suggested that intermediate tax on development rights, lease premium, floor space index and similar items should be exempted for houses where a completion certificate has not been issued.
The government is keen to ensure that builders do not raise prices, citing the withdrawal of input tax credit, and should actually reduce the rate. An official revealed that as per their analysis benefits were not being passed to the consumers, although high tax credit was being shown and low amount of tax being paid in cash.
