Washington: The issue of bringing real estate under the GST's ambit will be discussed next month, Finance Minister Arun Jaitley said on Thursday, as he acknowledged that it is one sector where the maximum amount of tax evasion and cash generation takes place.
The matter will be discussed at the next meeting of the GST Council to be held on November 9 in Guwahati, Jaitley said while delivering the 'Annual Mahindra Lecture' on India's tax reforms at the prestigious Harvard University.
"The one sector in India where the maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST," Jaitley said.
The Goods and Services Tax (GST) was implemented from July 1 this year. It brings the economy under a uniform tax regime.
"In the next meeting itself, we are addressing one of the problem areas or at least (having) discussion (on) it. Some states want, some do not. There are two views. Therefore, by discussion, we would try to reach one view," he said.
The move would benefit the consumers who will only have to pay one "final tax" on the whole product, Jaitley said.
"As a result, the final tax paid on the whole product in the GST would almost be negligible," the minister said.
Jaitley said the reduction in eventual expenditure coupled with incentivising people to enter the tax net may also help reduce the size of "shadow economy".
A 12 per cent GST is levied on the construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. However, land and other immovable property have been exempted from the GST.
On demonetisation, Jaitley said it was a "fundamental reform" which was necessary to transform India into a more tax-compliant society.
"If you see the long-term impact of it, demonetisation brought in more digitised transactions; it brought the issue to the centre stage. It expanded the individual tax base. It compressed the cash currency by three per cent which was operating in the market.
"Those objectives are for the long-term. No doubt there are short-term challenges, but (necessary) for transforming India from a non-compliant to a more compliant society," he said.
The finance minister said India had historically been one of the least efficient tax systems in the world with an extremely small tax base.
The Indian real estate market is expected to touch $ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country's GDP, according to India Brand Equity Foundation, a Trust established by the Department of Commerce, Ministry of Commerce and Industry. With pti inputs