Members of CREDAI and CREDAI-MCHI recently approached the government with a request to remove GST on free-of-cost flats provided to current residents in redevelopment projects, particularly in the Mumbai region. They are of the opinion that the flats are given without any compensation and the construction costs are already included in the sale price, they should be exempt from GST to avoid double taxation. The association believes that revising the GST regulations will create a more favourable environment for redevelopment initiatives and help unlock the real estate potential in the Mumbai Metropolitan Region.
CREDAI, a real estate association, has urged the government to remove the GST on free-of-cost flats given to current residents in redevelopment initiatives to enhance their economic feasibility, particularly in the Mumbai region. A group consisting of representatives from CREDAI and CREDAI-MCHI has held a meeting with Nirmala Sitharaman, the Union Finance Minister, and presented their formal proposal.
During the meeting, CREDAI reported that there were concerns voiced regarding the effects of GST on the construction of rehabilitation flats and redevelopment projects, which are constructed and provided to current residents without any charge. According to CREDAI MCHI, the imposition of GST on redevelopment projects in the Mumbai Metropolitan Region, which have been encouraged under DCPR 2034 regulations with a higher floor space index (FSI) for developers, is counterproductive as it hinders the potential of these initiatives to increase the value of real estate and poses a significant threat to the financial viability of several such projects.
According to the statement, the acts of granting new residences to current residents and selling properties in the public market are currently treated as distinct transactions, resulting in increased tax responsibilities. CREDAI has presented a number of justifications for altering the GST regulations in order to create a more favourable environment for revitalization undertakings.
According to the statement, the flats are offered to current residents, slum inhabitants, tenants, and flat owners at no charge; therefore, no GST should be levied when no compensation is provided. Additionally, the rehabilitation's construction expenses are already included in the sale price. According to CREDAI, imposing separate taxes on rehabilitation and sales would result in double taxation. The sale component has already been subjected to GST; consequently, the value of the rehab construction is also included and taxed under the same.
According to CREDAI, the development of rehabilitation projects serves as an essential input for the creation of a sales component, which in turn serves as the final output service. The association explained that flats being sold from the sale component are currently subjected to a 10 percent GST, with 5 percent being for rehabilitation and another 5 percent being for sale, which are both paid for by the end consumers.
According to the President of CREDAI National, Boman Irani, while the Mumbai Metropolitan Region (MMR) possesses immense real estate potential in India, there is a requirement for a favourable redevelopment environment to fully capitalize on this opportunity. He mentioned that a significant proportion of the population lives in run-down buildings or slums, with many buildings in a state of disrepair. According to Irani, it is important to make adjustments in regulations and taxation in order to enhance the supply and demand of such projects in the future.
As a result of the new GST, projects that are able to handle the additional burden will pass on the increased cost to their buyers, who will bear the expense through higher apartment prices. According to the developers' association, the implementation of GST on rehabilitation at hypothetical values has resulted in the project being unable to accommodate these extra expenses. As a result, slum inhabitants or existing tenants are impacted as the project cannot progress.
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