Finance Minister Arun Jaitley on Thursday said the issue of bringing real estate under the ambit of GST will be discussed by the GST Council next months. He added that there is “maximum” tax evasion and cash generation in the sector, making a strong case for its inclusion. “The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST,” Jaitley, who was delivering the ‘Annual Mahindra Lecture’ at Harvard University, was quoted as saying by PTI.
“In the next meeting itself, we are addressing one of the problem areas or at least (having) discussion (on) it. Some states want, some do not. There are two views. Therefore, by discussion, we would try to reach one view,” Jaitley added. The 23rd meet of the GST Council is scheduled in Guwahati on November 9.
The first reason presented by Jaitley to bring the sector under GST is to help consumers pay one “final tax” on the whole product. “As a result, the final tax paid on the whole product in the GST would almost be negligible,” the finance minister said, reported PTI. Land and immovable property is currently exempted from the uniform tax.
Jaitley reasoned that GST in real estate would prove as an incentive for consumers to enter the tax net. He added that it is likely to help reduce the size of “shadow economy”.
The finance minister also said that India has historically had one of the least efficient tax systems in the world, with a small tax base. “Frankly, over the last several decades, serious efforts, real efforts to expand this base had not been made. You had marginal efforts,” Jaitley said. “In the last few years, the bulk of the increase in tax payers has not been in terms of number of companies but individuals who are coming into the tax net,” he added. The real estate market is expected to touch $180 billion by 2020, according to PTI.
In its last meeting, the GST Coucil reduced rates for over two dozen commonly used goods and services. Jaitley, who had chaired the meeting, said, “Compliance burden of medium and small taxpayers in GST has been cut and the eligibility of Composition Scheme has been raised to Rs 1 crore.”
(With inputs from PTI)