Centre wants states to rationalise stamp duty, abolish it for low-cost housing

The central government has asked the state governments to waive off stamp duty on housing projects for the poor and rationalise the duty structure for other groups in order to boost availability of affordable houses.

Stamp duty is a state subject and it is for the state governments to decide on the rates, minister for urban development, housing and urban poverty alleviation M Venkaiah Naidu said on Monday.

Stamp duty rates vary from state to state and range between 4.6 per cent to 12.5 per cent at present. The high rate of stamp duty has been one reason for black money generation as customers wanted to show lower transaction to avail of relief in stamp duty.

However, stamp duty has been a major source of revenue for states and they are not ready to reduce this in the absence of alternate sources of revenue.

A lower rate of duty has the benefit of better compliance while also helping to reduce the generation of black money in the sector. Experts have called for at least a reduction in the rate to increase tax compliance. An abolition of the duty will reduce the prices of houses significantly, benefitting the customers.

Naidu said this while addressing an event organised by the realtors body CREDAI. He also assured that the GST (Goods and Service Tax) would not lead to rise in prices and certainly not for the affordable housing segment.

Naidu said the urban development ministry has recommended that the real estate sector should be taxed at a rate "which is revenue neutral and not at a higher tax rate". The minster, in fact, pitched for exempting the segment altogether from service tax under the GST regime so that prices for low-cost homes do not rise.

"Currently affordable housing is exempt from service tax. My ministry has already taken up with the Ministry of Finance the need to continue with this exemption under the GST," Naidu said.

The Budget has given infrastructure status to affordable housing schemes and reliefs to this segment would go a long way in placing more cash in the hands of home buyers, giving a leg-up to the real estate sector, he said.

On industry demand that stamp duty should be included in GST, Naidu said, "We all know states have in their wisdom not adhered to inclusion of stamp duty under GST. The GST Constitutional Amendment Act also does not provide for it".

The minister said although there is no clarity on the inclusion of real estate within the ambit of GST, the real estate sector would be benefited from this big reform One Nation One Tax.

"One big advantage GST is going to bring the industry is that cascading of taxes, ie, tax on tax would become a thing of the past. Input tax credit would be available, thus there is a huge incentive to bring all transactions in the real estate sector within the formal system to enjoy credits," he said.