New Delhi, April 18: While the government claims that the Goods and Service Tax (GST) Bill that is likely rolled out in July will make things cheaper to bring common man’s life to an ease, the Brihanmumbai Municipal Corporation (BMC) is likely to impose a surcharge of 1% on buying and selling of properties. BMC, the richest civic body in the country is likely to impose a surcharge on real estate properties across Mumbai. A dream house in Mumbai, which is the country’s most expensive property market is likely to become costlier over the period of time, thus shattering dreams of the common man.
If such is the case, real estate experts feel that negative impact of GST on the real estate sector may derail Prime Minister Narendra Modi’s flagship programme which aims to provide housing to all by 2022 in the urban areas. The proposal came up within a week of the state government increasing the ready reckoner rate (RR) by 3.95%, a quint report stated. The report also mentioned that the real estate in Mumbai is going through a slowdown since the past four years where property sales have fallen by 25%-35% as compared to the previous year.
While the GST bill is aiming at the reduction in the nominal tax rates for a vast majority of goods, the builders will, however, charge a huge sum from the buyers to make up for the loss. The Parliament passed four legislations to pave the way for the roll-out of the GST from the target date of July 1. As per the legislation, land leasing, renting of commercial properties and purchase of under-construction housing projects will attract GST, Livemint reported. ?(ALSO READ: GST to bring more people, business units under tax net: Adhia)
The BMC had to slash its budgetary outlay from Rs. 37,052 crore to Rs 25,141 which is a drop of Rs 11,911 or 32.14% from last year, Quint reported. Meanwhile, in March, Minister of State for Housing and Urban Poverty Alleviation (HUPA) Rao Inderjit Singh said in a written reply to Lok Sabha that no such information about the impact of GST on the real estate sector is available with the Ministry. (ALSO READ: Private equity biggest contributor to Indian real estate sector, says Knight Frank India report)
BMC Commissioner Ajoy Mehta while presenting the budget said that the steep fall comes in the backdrop of the GS roll out this year that aims to abolish Octroi. The collection from Octroi is BMC’s highest income generator and its abolition will cost BMC a loss of Rs 7,000 crore annually. He stated that since the BMC can’t afford such a huge loss, it needs a new source of income and hence, a surcharge in real estate will be what the BMC will be aiming at. Mehta said that the BMC expects to collect the loss with this surcharge amount.
It is a matter of concern for the real estate developers that the implementation of the goods and services tax (GST) may raise the overall cost of properties as the sector will come under the expected 18% tax slab. The surcharge that will be levied by BMC is believed to put an additional burden on the consumers and it is the common man who is going to suffer. The proposal, however, will come into effect only after it is approved by the state government. In the process, the Devendra Fadnavis government will have to clear it through the Maharashtra Stamp Act, 1958 and the MMC Act, 1888.