NEW DELHI: Ahead of Tuesday’s meeting of the GST Council, West Bengal has urged the apex body to make the scheme of 1% and 5% without ITC (input tax credit) for affordable and non-affordable housing optional for all ongoing projects and mandatory only for new projects which come up after April 1.
In the last meeting, the council had agreed to reduce the levy on under construction residential projects to 5% without ITC from the current 12%, with credit for taxes paid on inputs such as paints, steel, cement and sanitaryware. For affordable housing the rate was slashed to 1% without ITC from 8% with tax credit.
“While the basic decision of bringing the effective rates of affordable housing and non-affordable housing to 1% and 5% without ITC is something that all of us have agreed upon, the mechanism being proposed for the allowance of credit for on-going projects is highly cumbersome and mind boggling,” West Bengal finance minister Amit Mitra said in a letter to Union finance minister Arun Jaitley.
“If the developer has purchased material and taken the ITC, he will be permitted to use only the percentage he has invoiced and has to reverse the rest. This needs to be done project wise though earlier accounts were not maintained project wise. The net result would be that the cost of the ongoing project will increase immediately and the consumer will end up paying more rather than less,” Mitra said .