By PTI | Mar 28, 2017,
04.23 PM IST
Come July 1 and leasing of land, renting of
buildings as well as EMIs paid for purchase of under-construction houses will
start attracting the Goods and Services Tax.
Sale of land and buildings will be however out
of the purview of GST, the new indirect tax regime. Such transactions will
continue to attract the stamp duty, according to the legislations Finance
Minister Arun Jaitley introduced in the Lok Sabha yesterday for approval.
Electricity has also been kept out of the GST
ambit.
GST, which the government intends to roll out
from July 1, 2017, will subsume central excise, service tax and state VAT among
other indirect levies on manufactured goods and services.
The Central GST (CGST) bill -- one of the four
legislations introduced, states that any lease, tenancy, easement, licence to
occupy land will be considered as supply of service.
Also, any lease or letting out of the building,
including a commercial, industrial or residential complex for business or
commerce, either wholly or partly, is a supply of services as per the CGST
bill.
The GST
bills provide that sale of land and, sale of building except the sale of under
construction building will nether be treated as a supply of goods not a supply
of services. Thus GST can't be levied in those supplies.
'Goods' in earlier drafts of the bills were
defined as every kind of movable property other than money and securities but
includes actionable claim. 'Services' were defined as anything other than
goods. It was thought that GST may be levied on supply of immovable property
such as Land or building apart from levy of stamp duty.
But the
bills presented in Parliament have now clarified this position.
Tax
experts said that currently service tax is levied on rents paid for commercial
and industrial units, although it is exempt for residential units.
Deloitte Haskins Sells LLP Senior Director M S
Mani said: "While service tax is applicable at present on sale of under
construction apartments, it is levied on a lower value as abatement allowed.
The abatement is ostensibly to take care of the value of the land involved in
the construction of apartments".
He said the GST Rules, which will come up for discussion in
the Council meeting on March 31, would help ascertain whether a lower rate of
GST is proposed for such transactions or whether a similar abatement procedure
would be prescribed.
"This would also be dependent on the rate
fixation committee which is expected to finalise its recommendations in
April," Mani said.
Experts said service tax is currently levied on
payments made for under-construction residential houses after providing
abatement, which brings down the effective rate from 18 per cent to around 6
per cent.
"The government is trying its best to make
GST litigation free. The bills very clearly specify that GST would be charged
on any lease of land or letting out of the building or construction of a
complex, building, civil structure or a part thereof, where whole or any part
of consideration has been received before issuance of completion certificate or
its first occupation," Nangia & Co Director Rajat Mohan said.
Experts said the GST subsumes central levies like excise and
service tax and local levies like VAT, entertainment tax, luxury tax. However,
it does not subsume Electricity Duty.
Since the GST Constitution Amendment Act does
not provide for subsuming 'electricity duty' under GST, it will continue to be
levied by the respective state governments.
Certain states like Delhi exempt residential
properties from electricity duty but levy it on commercial and industrial
units.
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