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GST Council Set to Clarify Tax Exemption for RERA

Last updated: 26 February 2024

The Goods and Services Tax (GST) Council is poised to provide clarity regarding the exemption of the Real Estate Regulatory Authority (RERA) from GST payments, a senior official has revealed. RERA, established to regulate and facilitate the real estate sector, is positioned under Article 243G of the Constitution, which governs the powers, authority, and responsibilities of panchayats. Discussions have ensued regarding the applicability of GST to RERA, with implications for the real estate industry and state governments.

Function and Scope of RERA

RERA serves as both a regulator and facilitator within the real estate landscape, aimed at ensuring transparency in projects, safeguarding consumer interests, and establishing a mechanism for expedited dispute resolution. Given its constitutional framework and role in the sector, questions have arisen about the imposition of GST on RERA.

GST Council Set to Clarify Tax Exemption for RERA

Decision-making Process

Following deliberations with RERA officials to ascertain the nature of their functions, it has been determined that GST does not apply to RERA bodies. This conclusion is bolstered by the fact that RERAs are funded by respective state governments, making GST imposition tantamount to taxing state governments.

Upcoming GST Council Meeting

An impending meeting of the GST Council, chaired by the Union Finance Minister and comprising state ministers, is anticipated before the imposition of the Model Code of Conduct for the forthcoming general elections. This meeting aims to address various issues, including the clarification of GST applicability to RERA, in light of its constitutional standing and role in the real estate sector.

Historical Context and Expert Insights

Prior to July 18, 2022, several key regulatory bodies in India, including the Reserve Bank, Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDA), Food Safety and Standards Authority of India (FSSAI), and the GST network, were exempt from GST. However, discussions surrounding the lifting of this exemption have prompted considerations regarding the tax implications for RERA bodies.

Potential Benefits and Conclusion

Exclusion of RERA from GST considerations could potentially reduce expenses for developers and homebuyers, particularly given the ineligibility of Input Tax Credit (ITC) in the residential real estate sector. As such, a clarification from the GST Council on this matter would be immensely beneficial for the sector, providing clarity and alleviating uncertainties surrounding GST obligations for RERA.

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