Include real estate in new tax regime: Finance Commission
October 12th, 2009 - 10:50 pm ICT by IANSBangalore, Oct 12 (IANS) The 13th Finance Commission, which deals with the sharing of taxes between the central and state governments, sought to bring the burgeoning real estate under the proposed Goods and Services Tax (GST), a top official said Monday.
“I urge the government to include the construction and housing sectors (real estate) in the GST base either immediately or during a subsequent phase,” Commission chairman Vijay Kelkar said at a conference on GST, organised by the Federation of Indian Chamber of Commerce and Industry (FICCI) here.
Noting that the construction sector was a significant contributor to the national economy and housing expenditure dominated personal expenses, Kelkar told the chamber’s national executive committee members that the present piecemeal taxation of the real estate encouraged perverse incentives.
“Raw material is charged at Cenvat (central value-added tax), the works contract is charged at VAT and stamp duty levied on the sale deed. With no provision of input tax credit in place, there is little incentive to record such transactions either at the construction stage or at the sale stage at their correct value,” Kelkar said.
“Such multiplicity not only leads to substantial loss of tax revenue, but also fuels parallel economy.”
Seeking the support of the chambers of trade and commerce to the introduction of the GST effective from April 1, 2010, Kelkar said the railway sector should also be included in the GST base to provide a level playing field to the road and air freight sectors, which would be subject to the new tax regime.
“The inclusion of rail sector in the GST will ensure that all inter-state transportation of goods can be tracked through the proposed IT network,” the former finance secretary said.
The Indian Railways will benefit from this by availing input tax credit on the voluminous purchases it makes every year.
Endorsing Kelkar’s view, the chamber has called upon the government to include the real estate sector in the GST net.
“We favour extending the GST to the real estate sector to regulate the business and bring in transparency in its operations. Such a measure will help all stakeholders, especially buyers, curb speculation, check artificial pricing and ensure accountability,” FICCI president H.P. Singhania told reporters later.
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Tags: construction stage, executive committee members, federation of indian chamber of commerce and industry, finance secretary, goods and services tax, indian chamber of commerce, indian railways, input tax credit, inter state, national economy, national executive committee, parallel economy, perverse incentives, rail sector, railway sector, state governments, substantial loss, tax regime, transportation of goods, vijay kelkar