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CREDAI Urges Govt to Drop 18% GST on FSI Charges, Citing Housing Price Hike Risks

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The Confederation of Real Estate Developers’ Associations of India (CREDAI) has called on the government to reconsider its proposal to impose an 18% Goods & Services Tax (GST) on Floor Space Index (FSI) and additional FSI charges. Developers argue this move could lead to a 7-10% increase in housing prices, severely impacting affordability and the “Housing for All” initiative.

FSI and additional FSI charges, which constitute a major part of project costs, are currently exempt from GST under Article 243W of the Constitution. The proposed taxation, set for discussion at the upcoming GST Council meeting in Jaisalmer, Rajasthan, could increase financial burdens on developers and disrupt project timelines.

CREDAI President Boman Irani emphasized that the additional tax would deter housing supply and demand, further escalating development costs. The retrospective application of the tax, he noted, could destabilize existing projects and impose unforeseen liabilities, leading to financial challenges for developers and potential delays for homebuyers.

The industry body highlighted that affordable housing is already reeling from rising raw material costs. Imposing GST on FSI premiums would make such projects economically unviable, pushing up property prices and reducing affordability for the middle-class segment, which constitutes 70% of total homebuyers.

Developers are also excluded from claiming input tax credit (ITC) on GST, resulting in double taxation and additional financial strain. CREDAI has urged the government to maintain the current status quo and exclude FSI charges from GST, citing constitutional provisions that exempt such services provided by local authorities.

The proposal’s implications extend beyond housing prices. CREDAI warned that the move could stall projects, jeopardize the financial security of homebuyers, and adversely impact the economy.

The real estate industry now awaits the GST Council’s decision, hoping for a resolution that supports affordability, sustains housing demand, and aligns with the “Housing for All” mission.

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