The Confederation of Real Estate Developers’ Associations of India (CREDAI) has called on the Central Government to reconsider its proposal to impose 18% Goods and Services Tax (GST) on Floor Space Index (FSI) and Additional FSI charges paid to local authorities for real estate projects. In a letter addressed to the Finance Minister, CREDAI expressed concerns that this move would lead to a significant increase in housing prices, potentially rising by 7-10% across the country.
The real estate body argues that charging GST on FSI would create substantial cost burdens for developers, ultimately impacting both the demand and supply of housing. CREDAI warns that such a move, whether applied retrospectively or prospectively, could exacerbate financial pressures in an already struggling sector. This, in turn, could lead to stalled projects and threaten the financial security of homebuyers.
The industry is already grappling with rising raw material costs, and the proposed GST on FSI charges could make affordable housing projects financially unviable. CREDAI stresses that the added tax burden would push prices further, especially affecting the middle-class segment, which constitutes 70% of homebuyers. Additionally, real estate developers are excluded from claiming Input Tax Credit (ITC) on GST, which would lead to further financial strain and double taxation.
CREDAI further asserts that the legal framework surrounding this issue should exempt FSI charges from GST. Citing notifications 14/2017 and 12/2017, CREDAI points out that services related to urban planning and town regulation by local authorities, including FSI, fall under the purview of Article 243W of the Constitution, which exempts them from GST.
Boman Irani, President of CREDAI, expressed his concerns, stating, “FSI/Additional FSI charges constitute a significant portion of project costs. Imposing GST on these charges could be counterproductive, leading to higher housing prices and dampening both housing supply and demand. We strongly urge the Government to keep these charges exempt from GST, as any tax imposition—retrospective or prospective—could destabilize ongoing and future real estate projects.”
CREDAI has called for the Government to maintain the current status quo, urging that FSI charges be kept outside the scope of taxation to prevent adverse effects on housing affordability, demand, and the overall economy.
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