Thiruvananthapuram: The GST Council that meets on Thursday is likely to make a decision on bringing the real estate sector under the goods and services tax regime.
The Kerala government plans to strongly oppose the suggestion if it comes up for discussion during the council’s meeting, the last one before the central and state budgets.
Kerala is counting on a few other states to keep real estate out of GST’s purview.
Liquor, fuels, road tax and property registration were the only segments where states could still decide on the tax rate, with all other indirect taxes now subsumed under GST.
If property registration too comes under GST, it will partly block a stream of revenue that brings as much as Rs 2,700 crore to the state’s coffers every year.
The government levies 8% of the property value as stamp duty and another 2% as registration fee.
Since the national average for stamp duty is 5%, the GST rate is also expected to be pegged at a similar figure if this segment comes under the unified tax system.
While such a decision would affect the government’s revenue, it would reduce the tax burden on buyers.
For instance, a buyer has to pay a stamp duty of Rs 40,000 at present in Kerala on a property worth Rs 5 lakh. This would come down to Rs 25,000 if the GST rate is fixed at 5%.
On the other hand, if the GST Council decides to peg the rate at the GST slab of 12%, the tax burden would go up to Rs 60,000.
The Kerala government estimates a huge hit to its revenue if land registration is brought under GST.
The state currently gets about Rs 2,000 crore from stamp duty and another Rs 700 in registration fee every year.
While the state can still levy the registration fee, under GST, it will have to part with half the stamp duty with the central government. It is expecting a loss of at least Rs 1,000 crore every year in such a scenario.
At its meeting on Thursday, the GST Council is expected to cut the tax rate on electric vehicles and farm equipment among around 70 others.
In fact, more relief is expected with the central budget scheduled for February 1 and the state budget the following day.
The upcoming budgets are the first after GST was introduced on July 1 last year.
Since decisions on indirect tax, which were previously announced in budgets, were left to the GST council, the monthly meetings of the council now generate more expectations and suspense than the budget does.