A lower rate of Goods and Services Tax (GST) on under-construction residential properties from the current rate of 12 per cent to 5 per cent, extension of composition scheme for small service providers and a higher exemption threshold for micro, small and medium enterprises (MSMEs) will be discussed in the upcoming GST Council meeting on January 10.
The six-member ministerial panel formed to look into issues being faced by MSMEs under GST will meet before the Council meeting on January 6 to finalise its recommendations, a government official said. “A lower GST rate for under-construction residential properties is being proposed since the government believes that benefits of input tax credit availed by builders have not been passed on to consumers as lower prices. So, the Council will discuss a lower rate for it in the meeting,” a government source said.
The Council will also discuss a proposal for uniform rate on lotteries that are currently taxed at 12 per cent for state-run lottery and 28 per cent for state-authorised lottery. The government has been focusing on bringing down GST rates for the beleaguered construction sector, including a rate cut on cement from 28 per cent. In the previous 31st GST Council meeting held on December 22, the Council cut rates for 23 goods and services but stopped short of reducing rate on cement because of the huge revenue cost associated with it. Bringing cement from the 28 per cent slab to 18 per cent slab would mean a revenue loss of about Rs 13,000 crore a year.
At present, after one-third abatement of value of land (outside the ambit of GST), a 12 per cent GST is levied on under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. No GST is levied on properties for which completion certificate has been issued at the time of sale. In the run-up to elections this year, the focus is also on providing relief to MSMEs in order to ease their compliance burden. The Council will look into recommendations of the ministerial panel to raise the exemption threshold for GST from Rs 20 lakh at present to between Rs 20-75 lakh, a move which will remove about a fourth of the total registrants under GST but will have minimal revenue impact.
As per official data, about 31.12 per cent of the total 1.2 crore registrants under GST have annual turnover of Rs 20 lakh to Rs1.5 crore. A composition scheme for small service providers, in line with the existing composition scheme for traders, manufacturers and restaurants where a low nominal tax rate is levied, is also being worked upon by the law committee and fitment committee of the GST Council.
The inclusion of service providers under the composition scheme, however, is likely to meet with some resistance from the states who had opposed its inclusion earlier as well due to concerns regarding low compliance rate as has been observed in the case of traders and manufacturers. “Value addition for services sector is much higher than that for manufacturing or trading and therefore, higher revenue implications. This is likely to be opposed by some states,” a senior government official said. The Council will also take a view on levying calamity and disaster cess under GST.