Realty confederation urges govt to keep FSI charges outside of taxability

Bengaluru: Imposing GST on floor space index (FSI) charges would increase housing prices by 10 per cent and adversely impact demand, said the Confederation of Real Estate Developers' Associations of India (CREDAI) in a letter to the Finance Minister on Friday.

This move would have a substantial incremental impact on project costs, further pushing housing prices up across various parts of the country, explained CREDAI.

The confederation urged the central government to reconsider the proposition of charging 18 per cent GST on FSI/additional FSI charges paid to local authorities for real estate projects.

Imposing GST on these charges, either retrospectively or prospectively, would affect not just housing demand but also supply, as it would raise significant economic and viability concerns, said CREDAI.

Retrospective clarification of GST on such payments would burden realty developers with unforeseen liabilities, disrupting the financial and cost planning of on-going and completed projects. The resulting financial pressures could potentially lead to stalled developments.

Meanwhile, they declared that prospective application would substantially elevate construction costs, imposing additional financial burdens on end consumers and deteriorate housing affordability.

Additionally, developers are excluded from claiming input tax credit (ITC) on GST. As per CREDAI, this move will further accrue costs and lead to double taxation, increasing prices as a direct consequence.

CREDAI also cited the 12th Schedule of the Constitution (Article 243W), stating that GST will not be chargeable on public services including urban planning and construction and upgradation of buildings amongst other functions. The confederation argued that this thereby legally excludes FSI from GST levy.