GST 2.0 on Housing: Simplification Doesn’t Guarantee Affordability for All Buyers
A Chartered Accountant (CA) has issued a caution regarding the recent Goods and Services Tax (GST) 2.0 simplification measures for the housing sector, warning that while the new structure simplifies tax calculation, it does not automatically ensure affordability for all homebuyers.
Key Concerns Highlighted by the CA
- Loss of Input Tax Credit (ITC): The new simplified GST structure for residential real estate mandates lower fixed tax rates (e.g., 5% without ITC on regular projects) but completely denies developers the benefit of claiming ITC on construction materials (cement, steel, etc.).
- Built-in Costs for Developers: The CA argues that the denial of ITC forces developers to treat the GST paid on raw materials as a direct cost of construction. This “hidden” or “blocked” tax cost is inevitably passed on to the homebuyer, either by hiking the base price of the apartment or through other charges.
- Limited Affordability Gain: While the headline tax rate on the final sale is lower, the actual final price paid by the consumer may not see a significant reduction, or any reduction at all, due to the developer’s need to recover the lost ITC.
- Focus on Simplification, Not Price Reduction: The simplification benefits the developer by making compliance easier, but the CA warns that the reform’s primary objective seems to be simplification rather than a fundamental price reduction across the board for all segments of homebuyers.
Source :- Business Today