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New GST norms for real estate mere optics: Manpreet

March 20, 2019 07:27 AM


Sukhdeep Kaur
New GST norms for real estate mere optics: Manpreet
Punjab FM says realty sector prone to tax evasion, new rules will open up possibilities of tax avoidance

It seems a new draconian law is being written only to grant concessions, which would practically achieve nothing except just optics. MANPREET SINGH BADAL , Punjab finance minister

CHANDIGARH: Sounding a stern warning to the BJP-dominated GST Council, Punjab minced no words in calling the new real estate law being drafted by it as “perhaps the worst aberration and biggest blunder” in the goods and services tax (GST) regime during a meeting in New Delhi on Tuesday.

The council agreed to demand of real estate developers to end input tax credit (ITC) and also lowered the GST rates on underconstruction and affordable projects. A lower GST without ITC, experts say, would not serve any purpose for the real estate sector.

The most vociferous criticism of the draft notification from Congress-ruled states came from Punjab finance minister Manpreet Singh Badal who questioned the council’s move to invoke extraordinary powers to grant exemptions to the sector. “It seems a new draconian law is being written only to grant concessions, which would practically achieve nothing except just optics,” he said.

While Union finance minister Arun Jaitley said after the meet that the new rules will be a major step in efforts to give “boom” to the real estate sector and make housing affordable for the middle, neo-middle and aspirational class, Manpreet said affordable housing needs government’s support and the manner in which it is being done makes it one of the “worst cases of retrospective legislation” as new accounts will have to be maintained projectwise not registration-wise and not only for the future but also the past. Also, eligible credits already utilised will have to be reopened, he said.

Punjab’s concerns are loss of revenue due to the GST exemptions and a large amount of input tax credits may have to be reversed. “We maintain our initial suggestion that the sector should not be taken out of tax credit chain,” Manpreet said at the meeting, adding: “The new rules will not stop flow of black money, instead open up huge possibilities of tax avoidance.”

Taking a dig at the provision of 80% sourcing of raw material from dealers in the GST chain, Manpreet said it would create larger legal issues, citing examples of “bhoomi poojan” or promotional liquor party thrown by a builder, which may attract GST if he fails to meet the 80% stipulation on sourcing of raw material. “It may also lead to double taxation,” Manpreet said, demanding that the scheme be kept in abeyance till wider trade consultations.

Notably, Manpreet had written to Jaitley after the last GST Council meeting in February to exempt premium on long leasing of land, a concern not addressed by the council. With scarce land for industrial parks and cities, exemption for long term lease is important for Punjab to attract investment being targeted by its new industrial policy.

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