Ahmedabad: Ahead of the forthcoming GST Council meeting, Credai Gujarat has submitted a representation to state govt urging it to take up key taxation issues impacting housing delivery, demanding clarity on GST applicability to FSI and additional FSI purchased from urban local bodies.
Credai Challenges GST Demands on Municipal Charges
The Confederation of Real Estate Developers’ Associations of India (Credai) has raised concerns regarding 18% Goods and Services Tax (GST) demand notices issued by field tax offices. These notices pertain to charges paid to municipal corporations and urban development authorities for Floor Space Index (FSI) and additional FSI. Credai argues that these charges are part of statutory town-planning functions and should not be subject to GST.
According to Credai, the functions assigned to municipalities under Article 243W of the Constitution, in conjunction with Section 7(2)(b) of the CGST Act and Notification 14/2017, do not qualify as a supply of goods or services, thereby exempting them from GST.
A representative from Credai-Gujarat expressed frustration, stating, “Despite the statutory framework that places municipal planning functions outside GST, members are receiving notices demanding 18% tax on FSI and additional FSI charges, creating avoidable uncertainty and project delays.”
Credai said developers pay 18% GST on works contracts and multiple inputs without input tax credit, embedding taxes into costs While the headline GST on home sales is 1% for affordable housing and 5% for other residential units.
The association said that rapid urbanisation will require a significant addition to housing stock, and argued that tax policy should prioritise supply expansion, especially in the affordable segment. It cited a widening mismatch between demand and supply in affordable housing and said states bear the brunt of shortages through unplanned settlements and stressed civic infrastructure. “Without input tax credit, the 18% works-contract levy becomes a direct cost that ultimately burdens homebuyers; a reduction to 12% — at least for affordable housing — will support demand and improve viability,” the representation said.
Another key demand was a reduction in the GST rate on works contracts used in housing construction.