Real estate is
often seen as one of the worst sectors in so far as tax evasion is
concerned. To address this issue, the government might soon move to
bring it within the ambit of
goods and services tax (GST). Finance Minister
Arun Jaitley indicated this on Thursday while speaking at
Harvard University in the US. The
GST Council,
at its November meeting in Guwahati, would consider covering the sector
under the new indirect tax regime, Jaitley said.
While delivering a lecture on tax reforms in the country, he called the
taxation system in India one of the least efficient in the world, with a
very small tax base. He also hinted at making Aadhaar mandatory for buying a car or international air tickets in the future, taking a cue from the recent Supreme Court judgement.
The GST was
rolled out on July 1, replacing a large number of indirect taxes with
one unified tax of five rates. Petroleum, real estate, and alcohol were
kept out of its ambit.
"The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I believe that there is a strong case to bring real estate into the GST," Jaitley said.
The stamp duty, which is outside the GST, has complicated the tax structure for real estate. A lot of states had opposed the inclusion of the stamp duty in the GST, as it was a source of revenue for them.
"Some states want; some do not. There are two views. Therefore, by discussion, we would try to reach one view," he said.
A 12 per cent GST is
levied on construction of a complex, building, or civil structure
intended for sale, wholly or partly. However, land and other immovable
property have been exempted from the GST. If real estate is brought under the GST, the final tax would be almost negligible, Jaitley added.
The FM is on a week-long visit to the US, where he will attend the
annual meetings of the International Monetary Fund and the World Bank.
Earlier, Jaitley had said bringing real estate under the GST was easier than petroleum.
Jaitley said there would have to be some link between lifestyle and
expenditure, and taxes paid, in the future. "Unquestionably and
historically we have had one of the least efficient... tax systems [of]
any country in the world."
The FM also spoke of making Aadhaar mandatory
for buying cars or international air tickets. According to one judicial
opinion, this might be treated as an exception to the law of privacy,
keeping the revenue interests of the state in mind.
"You have 12-15 million cars being bought every year. You have 20
million people travelling overseas every year. And, if you compare it
with the spending data, the base itself is extremely narrow," he said.
Jaitley also spoke on revenue collection under the GST and demonetisation.
He said in the first month since the GST roll-out,
only 5.5 million people had filed returns and 40 per cent assessees had
paid no tax. "So even now... the habit of paying a marginal or
negligible amount or not paying anything at all is quite prevalent."
About 95 per cent of taxes in the first two months had come from only 400,000 assessees.
The FM also described the note ban — in November last year — as a fundamental reform, necessary to make India a more tax-compliant society.
He added systematic efforts to challenge the "shadow economy" were made
only recently. "In the last few years, the bulk of the increase in tax
payers has not been in terms of number of companies but individuals who
are coming into the tax net."