Impact of GST on FSI Charges: A 10% rise in Housing Prices may occur

The central government has been urged by the real estate body CREDAI to reevaluate the idea of applying an 18% GST rate to the floor space index (FSI) or additional FSI charges that are paid to local authorities for real estate projects.

It stated that the action might have a negative impact on real estate demand and result in a 10% increase in housing prices.

The 55th GST Council meeting will be presided over by Finance Minister Nirmala Sitharaman on Saturday in Jaisalmer, Rajasthan.

In a letter to the minister of finance on Thursday, CREDAI stated that the decision to apply an 18% GST on FSI would significantly increase project costs and drive-up housing prices by approximately 10% nationwide.

Credia wrote, "Imposing GST on these charges, either retrospectively or prospectively, would raise significant economic and viability concerns that would affect not only housing demand but also supply."

The CREDAI further asserts that retroactively clarifying the GST on these payments would subject real estate developers to a great deal of unanticipated liabilities, which would interfere with the financial and cost planning of both ongoing and finished projects. The consequent financial strains may cause development to stall and endanger the financial stability of homebuyers who have invested in these projects.

CREDAI claims that developers are not eligible to claim Input Tax Credits (ITC) on GST. This decision will result in additional expenses and double taxation, which will ultimately drive-up prices.