With the levy of 12% GST on construction services, the real estate sector is facing a significant constraint as to the sale of under construction property. Recognising this issue and with a view to mitigate the same the GST Council has formed a special committee, based on the recommendation of which it is expected that the GST rate on under construction property will be reduced. However, the issue faced by the Real Estate sector has resulted in huge unsold inventory in the hands of the real estate developers.
Under the Income Tax act any inventory lying unsold beyond a year attracts notional rent on which income tax is payable by the developer. The proposed amendment seeks to extend the period beyond which income tax on notional rent will be payable from one year to two years. This is surely a welcome move for the real estate sector specially at this stage.