Input Tax Credit Removal On Select Items Goes Against The Very Spirit Of GST: Experts
NEW DELHI: The government last month slashed the Goods and Services Tax (GST) on the real estate sector, but along with that it also did away with the input tax credit (ITC), which experts and analysts feel goes against the very purpose of tracking the money trail and curbing black money.
Under-construction properties and affordable housing are the latest segments under GST, after restaurants, to have been denied ITC, by virtue of the rate cut, to 5 per cent or below. ITC is the credit available for all taxes paid on inputs across the value-chain to make production transparent and efficient as well as create audit trails to curb tax evasion.
"It does go against the very spirit of GST. Restricting input is not a good idea for any sector, and particularly for real estate, which needs to be formalised more," Pratik Jain, partner and leader for indirect tax at PwC India, told news agency IANS.
Anuj Puri, chairman of ANAROCK Property Consultants, said after the rate cut and removal of ITC, developers may have to take a hit in their profit-margins, inducing them to resort to cash payments while purchasing inputs or raw materials. "This will increase the scope of black money generation in the market," Mr Puri told IANS.
According to Mr Jain, the government slashed GST to 5 per cent and 1 per cent on the under-construction and affordable housing projects, respectively, and removed ITC as several real estate developers didn't pass on the availed tax credit to customers.
"It's more in the direction that it (government) wanted to give relief to the common man. But it is obviously not a good idea from a policy standpoint," he said, adding restricting input credit may incentivise cash or black money transactions in the sector.