IS ANTI-PROFITEERING SUFFICIENT???

 

Why does the government need to take more actions besides the ANTI-PROFITEERING????

 

The Goods and Services Tax (GST) is one of the masterstrokes by the current government to ensure an inclusive growth throughout the country. On one hand it’s brings a large number of businesses under the ambit of tax system of the country, whereas on the other hand, it is believed to be an effective tool in reducing the tax burden of the tax payers through various provisions like Input Tax Credit (ITC), which is a rebate applicable on indirect tax paid while purchasing the raw materials and services used during construction. However, the concerns regarding the smooth passage of the benefits of the GST in the form of price reduction were needed to be encountered by the think tanks behind the GST. And to ensure the same the GST council proposed the admission of the anti-profiteering provisions in the GST bill. Click here to read about the anti-profiteering provisions

As per some experts, while the anti-profiteering provisions directs the builders to pass on the benefits aroused due to the  ITC to buyers, the final benefit to the home buyer might be zeroed ins dome states, when the stamp duty is taken into the consideration. In some cities the stamp duty, when loaded with cess and surcharge, may go as high as 10-11%. Besides this, the GST applicable on under-construction flats and houses is 12% and comes down to 7-10% after deducting the Input Tax Credit. Hence the net effect after adding the stamp duty would get nullified.
Moreover, the ITC on the high end localities would also be less as the cost of the land element is higher in such areas. While the abatement has been fixed at 30% of the sale price of the property, a large proportion of the price of the property includes the land price whereas the inputs on other materials and services remain same. As a result of which a buyer will have to shell out more in such localities while the input benefit he would be getting will remain the same resulting in a higher price.

Obviously the government needs to increase the abatement on the land price to bring down the overall cost. Besides this, the government must also keep a close eye on the passing on genuinely the benefits to the buyers as the builders will also get a transitional input credit for stock purchased before GST. So, the government must make sure that both the parties get their due under the new tax regime and are able to reap the benefits of the anti-profiteering. There are some other concerns in the infrastructure industry that we would be covering in the next blogs.