The construction sector is reeling under a sluggish phase hit by demonetisation, implementation of RERA and replacement of previous service tax and VAT by GST. In its pre-budget expectations 2018, the sector seeks some favorable sops by way of lowered GST rate, grant of infrastructure status.
Infrastructure status: The top most concern or expectation of the sector from the upcoming budget is the grant of infrastructure status as it is then expected to boost up the demand with lower financing rates for developers.
As quoted in the PTI report, it is then when the sector will be able to pass on advantage to Economically Weaker Section and Lower Income Group customers.
GST rate rationalization: After the new indirect tax regime has been implemented since July1, 2017, service tax of 4.5% and VAT levied @ 1% has been replaced by GST. At present, ready to move in projects do not result in levy of GST. But ongoing projects or under-construction property attracts GST @ 12%.
The industry body however expects rationalization of the same by bringing the rate to 6% instead of 12% with availability of input tax credit.
Stamp duty which is applicable even after GST implementation is also being sought to be covered under the ambit of GST. The stamp duty charges vary across states and an additional burden for a home buyer.
The industry body expects either its complete abolition or merger of add-on cost including stamp duty and registration charges with GST rate. Such additional charges that also include brokerage fee prove heavy on the pockets of the buyer.
Tax sops: At present the tax deduction limit for housing loan stands at Rs. 2 lakh and the industry expects a further hike in it. For first time home buyers who are provided a tax incentive of Rs. 50000 is also expected to be hiked to Rs2 lakh.
Further income tax concession to the tune of Rs. 5 lakh per year are being sought for home buyers.
Blows to the sector:
Decline in new home launches: Some of the blows to the sector in the recent past or say a year back had been a decline in new home launches from 1,75,822 in 2016 to 1,03,570 units in 2017.
High unsold inventory: In 8 of the major cities of India, inventory that is indicative of a sector's health has stood at a high of 10 lakh units. This has come even after the prices have gone down drastically and are to an extent favourable for the end buyer.
Proposal to levy 8-10% tax for unsold units classified as stock in trade: The department of Income tax has sought a method to check illicit hoarding by developers only to earn better price for their projects with a levy of such unsold inventory. The levy was expected to be applicable from the beginning of this year.
With Inputs From PTI