Constitution of GoM for Boosting Real Estate Sector under the GST Regime

India's real estate sector plays a significant role in the country's economy, accounting for approximately 7% of its GDP. Since the implementation of the Goods and Services Tax (GST), there has been a need for a constitution of a Group of Ministers (GoM) to boost the real estate sector under the GST regime. This article aims to examine the constitution of the GoM and its impact on the real estate sector.

Background:

The Indian real estate sector has been facing several challenges over the years, including the lack of transparency, high transaction costs, and poor infrastructure, among others. The implementation of GST was supposed to address some of these issues by streamlining the tax structure and reducing the overall tax burden on the real estate sector. However, the transition to the GST regime has not been smooth, and the real estate sector has been struggling to adapt to the new tax system.

Constitution of the GoM:

To address the challenges facing the real estate sector under the GST regime, the Government of India constituted a GoM in February 2019. The GoM was tasked with examining the tax structure of the real estate sector and making recommendations to boost the sector's growth. The GoM consisted of eight state finance ministers and was headed by the then Gujarat Deputy Chief Minister Nitin Patel.

Recommendations:

The GoM submitted its report in February 2019 and made several recommendations to boost the real estate sector. Some of the key recommendations are as follows:

Reducing GST Rates: The GoM recommended reducing the GST rates for under-construction properties from 12% to 5% and for affordable housing from 8% to 3%. This move was aimed at making housing more affordable for the common man.
Input Tax Credit: The GoM recommended that input tax credit (ITC) be reintroduced for under-construction properties. ITC was withdrawn from the real estate sector in April 2019, which had a significant impact on the sector.
Stamp Duty: The GoM recommended that stamp duty be subsumed under the GST regime. This move was aimed at reducing the overall tax burden on homebuyers.
Clarity on Real Estate: The GoM recommended that real estate be defined as a separate sector under the GST regime. This move was aimed at providing more clarity on the tax structure of the real estate sector.
Single Window Clearance: The GoM recommended that a single-window clearance mechanism be put in place for real estate projects. This move was aimed at reducing the time and cost involved in getting approvals for real estate projects.

Impact of the GoM:

The recommendations of the GoM have had a significant impact on the real estate sector. The reduction in GST rates has made housing more affordable for the common man, while the reintroduction of ITC has reduced the overall tax burden on developers. The subsuming of stamp duty under the GST regime has also reduced the tax burden on homebuyers. The clarity on the tax structure of the real estate sector has reduced the confusion surrounding the GST regime, while the single-window clearance mechanism has reduced the time and cost involved in getting approvals for real estate projects.

Conclusion:

The constitution of the GoM for boosting the real estate sector under the GST regime has been a significant step towards addressing the challenges facing the sector. The recommendations made by the GoM have had a positive impact on the sector and have helped boost its growth. The real estate sector is a vital sector for the Indian economy, and the GoM's efforts towards its development are commendable.