New Delhi: The GST Council on Saturday deferred a proposal to charge GST on FSI as the Centre intervened asking the council to reconsider the proposal since this topic falls under the domain of municipalities and local authority, according to an official statement. “The issue of whether charges collected by municipalities for granting FSI, including additional FSI, are chargeable to GST on a reverse charge basis was brought up in the Council,” according to the statement.
Earlier, the Confederation of Real Estate Developers’ Associations of India (CREDAI) wrote to the government urging that the proposal to impose 18 per cent GST on FSI should be scrapped. The industry body informed Finance Minister Nirmala Sitharaman that the proposal could lead to a jump in property rates by 7-10 per cent, impacting the affordability of homes.
What is FSI and why is it important?
FSI or floor space index is a metric of real estate planning. Commonly called floor space area (FRA), FSI is used by real estate developers to determine a project size. According to CREDAI, 18 per cent GST would have burdened existing residential projects. Construction costs would have shot up, ultimately affecting the buyer, CREDAI informed the government.
A GST rate of 18 per cent on these may have led to project delays, CREDAI added. NREDC chairman Niranjan Hiranandani also warned against GST revision on FSI, adding that it would have a cascading effect on the real estate sector. Everything, from finances to raw materials and labour costs will be affected by such changes, he added.
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