If what Jaitley says is to be believed, real estate could come into the purview of Goods and Services Tax (GST). This move is seen as a huge boost for the government, which is looking for funds to deliver on various infrastructural promises.
Identifying real estate as the one sector where maximum amount of tax evasion takes place, Finance Minister Arun Jaitley on Wednesday said that the matter will be discussed in the next meeting of the GST, which will be held on November 9, in Guwahati, Mr. Jaitley said, while delivering a lecture at Harvard University.
“The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST,” Jaitley said, while delivering the ‘Annual Mahindra Lecture’ on India’s tax reforms.
The Finance Minister said the move would benefit the consumers who will only have to pay one “final tax” on the whole product.
“As a result, the final tax paid on the whole product in the GST would almost be negligible,” he said.
Mr. Jaitley said the reduction in eventual expenditure coupled with incentivizing people to enter the tax net may also help reduce the size of “shadow economy”.
A 12 per cent GST is levied on construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. However, land and other immovable property have been exempted from GST.
The Finance Minister said India had historically been one of the least efficient tax system in the world with an extremely small tax base.
“Frankly, over the last several decades, serious efforts, real efforts to expand this base had not been made. You had marginal efforts,” he said, adding that systematic efforts to challenge the “shadow economy” were made only recently.