Reconsider 18% GST on FSI paid to local authorities, plea by CREDAI to FM

CHENNAI:
The Confederation of Real Estate Developers' Associations of India (CREDAI) has urged the Union Finance minister Nirmala Sithraman to reconsider the proposition of charging 18% goods and service tax (GST) on Floor Space Index (FSI)/ Additional FSI charges paid to local authorities for real estate projects as it would push the housing prices by approximately 10% across various parts of the country.

In a letter addressed to the Finance Minister, CREDAI said this move would have a substantial incremental impact on project costs."Imposing GST on these charges, either retrospectively or prospectively, would also affect not just housing demand but also supply as it would raise significant economic and viability concerns," CREDAI said.

Already burdened by rising raw material costs, any such additional charges will make affordable housing projects economically unviable, potentially pushing the prices upwards by 7-10% and directly impacting the purchasing power of the middle-class segment – which constitutes 70% of total homebuyers. Additionally, Developers are also excluded from claiming Input Tax Credit (ITC) on GST and this move will further accrue costs and lead to double taxation, increasing prices as a direct consequence, CREDAI said in a statement.
 
CREDAI claimed that retrospective clarification of GST on such payments would burden Real Estate Developers with an enormous amount of unforeseen liabilities, disrupting the financial and cost planning of on-going and completed projects. "The resulting financial pressures could potentially lead to stalled developments and jeopardize the financial security of homebuyers invested in these projects. Even prospective application would substantially elevate construction costs, imposing additional financial burdens on end consumers and deteriorate housing affordability issues, hindering the collective mission towards ‘Housing for All’," the statement added.

Provision of FSI and levy of various charges and fees squarely fall within the functions envisaged in the twelfth schedule of the constitution thereby excluding the same from levy of GST, the statement added.