CREDAI urges FM to reconsider 18% GST on FSI

The Confederation of Real Estate Developers’ Associations of India (CREDAI), India’s apex body for the real estate industry, has written to the Union Finance Minister, urging her to reconsider the proposal to charge 18% GST (Goods and Services Tax) on FSI/Additional FSI charges paid to local authorities for real estate development projects.

According to CREDAI, this move would have a significant added influence on project costs, increasing housing prices up about 10% across the country.

CREDAI stated that imposing GST on these charges, either retrospectively or prospectively, will have an impact not only on housing demand but also on supply, raising serious economic and viability problems.

CREDAI further contends that retrospective GST clarification on such payments will burden real estate developers with a massive amount of unknown liabilities, upsetting the financial and cost planning of both ongoing and completed projects. The resulting financial difficulties may cause blocked developments and jeopardise the financial security of homebuyers who have invested in these projects. Even a speculative application would significantly increase construction costs, putting further financial strain on end users and worsening housing affordability issues.

The industry is already burdened by rising raw material costs, and such additional charges will render affordable housing projects economically unviable, potentially pushing prices up by 7-10% and directly affecting the purchasing power of the middle-class segment, which accounts for 70% of all homebuyers. Furthermore, developers are barred from claiming ITC (Input Tax Credit) on GST, which will increase costs and lead to double taxation, resulting in higher pricing.

President of CREDAI, Boman Irani stated, “FSI/ Additional FSI charges form a significant part of the project cost, and the proposal to impose 18% GST on such charges could prove to be counterproductive and act as an a barrier to housing supply and demand, owing to additional financial obligations and increasing housing prices as a direct consequence.”

“We strongly request and recommend that the government keep the FSI charges exempt from GST. Any retrospective or prospective charges could destabilise the financial underpinnings of multiple projects, limiting developers’ capacity to take possession on time,” he noted.