CREDAI urges centre to remove GST on flats given free of cost in redevelopment projects

NEW DELHI: Realtors’ body CREDAI has demanded the government should do away with the GST on
flats which are given free of cost to existing occupants in redevelopment projects to make them
economically viable, especially in the Mumbai region. A delegation from CREDAI and CREDAIMCHI has met Union Finance Minister Nirmala Sitharaman and made a formal representation in this
regard. In the meeting, they expressed concerns over “the impact of GST being levied on redevelopment projects/
rehab flats which are being built and given back, free of cost, to existing occupants”, CREDAI said in a statement.

With the regulations for redevelopment in Mumbai Metropolitan Region (MMR) coming under the ambit
of DCPR 2034 that encourages such projects with a higher FSI (floor space index) allowed for
developers, CREDAI MCHI said the GST being levied on such projects is defeating the very purpose of
enhancing real estate value as it puts the financial feasibility of numerous projects under severe risk.
“Currently, providing new houses to existing occupants/tenants/flat owners/slum dwellers (output service)
and selling the flats/shops/offices (sale component) in the open market are being viewed as separate
transactions – leading to higher tax obligations,” it added.

CREDAI said it has put forth multiple arguments to restructure the GST provisions for a more conducive
ecosystem for redevelopment projects.
“The flats to existing occupants/slum dwellers/tenants/flat owners are provided free of cost and hence no
GST should be charged where there is no consideration,” it said, adding that the cost of construction of
rehab is already subsumed in the cost of sale component.
Hence taxing both rehab and sale separately would lead to double taxation, CREDAI said.
“Sale component is already offered for GST and hence in effect value of construction of rehab is also
offered for GST being within it,” it added.
CREDAI said that the construction of rehab projects is an input service which is a prerequisite for
construction of sale component which is the output service.
“In effect, 10 per cent GST is currently being charged on flats (5 per cent on rehab and 5 per cent on sale
both borne by ultimate consumers) being sold from the sale component,” the association said.
The MMR is one of the most valuable real estate markets in India but need for a conducive
redevelopment ecosystem for the region was felt to fully realise its potential, Boman Irani, President at
CREDAI National, said.
There are numerous dilapidated buildings with roughly 50 per cent of population still residing in the
slums or old, dilapidated buildings, he added.
Irani said there is a need to course correct certain aspects from a regulatory and taxation standpoint, which
will boost demand-supply for such projects in the long run.