There are some theoretical moves to drum up support for the need to include immovable property in the GST tax base. I am writing to say that it is not necessary, not desirable and is nothing but a misadventure. Such a move may be out of the intention to queer the pitch of GST with the motive of delaying its roll out indefinitely.
Immovable property is neither goods nor services. We can now achieve GST in the way in which it has been conceptualised, that is, by amalgamating taxes on goods and services. Goods means moveable goods. If immovable goods are to be brought into GST, then the concept of goods will have to be changed. Immovable property have been separately defined in the General Clauses Act, 1897 at Section 3(27) as the following: “(26) immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth”. That is not the same as goods in Excise and Sales Tax where it is moveable goods. And in the common parlance the idea of goods is that it is movable goods and not immovable property. Finally the expression “goods” in the Entry 84 of List I and Entry 54 of List II of the Constitution also refers to moveable goods. Therefore, the present structure of GST does not allow immovable property to be included as per the Constitution. There is no rational justification to squeeze in a definition which is not only against the definition of goods in excise and sales tax but also against the definition in the common parlance and the Constitution. In any case it will greatly delay the introduction of GST which has already been delayed too long.
Coming to the basic arguments in favour of including immovable property in GST, let me examine them here as follows.
(i) It is said that GST is a consumption tax and so all taxes on consumption should be included. This is plainly wrong because land is not consumed. Buildings are consumed over may be 50 or 60 or 100 years. Landed property is not considered as consumable goods in common parlance.
(ii) It is said that the menace of black money in real estate can be checked by bringing real estate in GST because the buyers and the builders will insist on invoice for their respective purchases. This argument is utopian. Black money will still continue along side invoices which is the position now. Nothing will change just because we call it GST.
(iii) It is said that some 25 countries have introduced immovable property in GST, France, Spain and Canada being notable ones. Close scrutiny shows that there is no commonness excepting that land is exempt and value added tax is charged on buildings new or innovated. Even in India when land or property are sold with higher value, tax such as stamp duty and capital gains tax are charged on value. So it is already a value added tax. So the only question that remains is about merger of this with GST. Largest majority of countries have not introduced it.
Constitutional amendments will be a great hurdle.
(a) Entry 63 of the state list dealing with rates of stamp duty on property would need to be shifted to concurrent list to be applicable to GST.
(b) Entry 18 of the state list awards land i.e. right in or over land as well as transfer and alienation of agricultural land to the state.
(c) Entry 49 provides for tax on lands and buildings as state subject. These entries also would have to be amended and brought to the concurrent list.
(d) Entry 84 of list I and 54 of list II also have to be amended. So many amendments will create tremendous strife between the Centre and the states since it will upset the balance of federalism and cause injury to the fundamental structure of the Constitution. It will be impracticable to introduce such sweeping change in the Constitution.
Conclusion: For all these consideration any proposal to include immovable property the design of GST should be rejected in limine.
Email: smukher2000@yahoo.com
