The Confederation of Real Estate Developers’ Association of India (CREDAI) and Maharashtra Chamber of Housing Industry (MCHI) has urged Finance Minister Nirmala Sitharaman to restructure the Goods and Service Tax (GST) levied on redevelopment projects, citing concerns about the tax's impact on projects that provide free housing to existing occupants.
Double Taxation Issue
Developers argued that treating the provision of new houses and the saleable component as separate transactions results in higher tax obligations. They believe that taxing both the rehabilitated and saleable components separately amounts to double taxation since the cost of rehabilitation is already included in the cost of the sale component.
CREDAI and MCHI requested the non-levy of GST on rehabilitation components, emphasising that these components are provided to occupants without any fee.
Current GST Structure
Under the current system, flats are subjected to a 10% GST, with 5% on rehabilitated components and 5% on saleable components.
The Mumbai Metropolitan Region is highlighted as a valuable real estate market, with a significant number of dilapidated buildings and a substantial portion of the population residing in slums or old structures. A conducive redevelopment ecosystem is seen as crucial for unlocking the region's potential.
Course Correction Needed
Boman Irani, President of CREDAI National, emphasised the need for regulatory and taxation adjustments to support redevelopment projects. These adjustments would enhance economic value, foster demand and supply, and benefit low- and middle-income segments of the population in the bustling city.
