Then, there are issues which need threadbare analysis. Immovable property is neither goods nor services. It has been separately defined in the General Clauses Act, 1897, at Section 3(27) as: "(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 movable goods. And, in common parlance, the idea of goods is that it is not immovable property. Finally, the definition of goods in Article 366 is "Goods includes all materials, commodities and articles". If goods are made to include immovable property, it will tread on the jurisdiction of income tax (I-T), as the latter taxes income from property. Therefore, the present structure of GST does not allow immovable property to be included according to the Constitution. It will upset the whole Constitutional balance of the taxation structure.
It is said inclusion of real estate will bring a better audit trail and enable the government to check black (unaccounted) money, since buyers and builders will insist on invoices for the respective purchases. For, an invoice will be necessary for taking input credit. This argument is not correct. Those who have an idea about transactions in real estate know very well that invoices will still continue at a lower rate and cash payment will continue side by side. If evasion can continue with the present GST, it will also continue after real estate is included.
It is already a value-added tax (VAT). Already stamp duty, registration fee and capital gains tax are calculated on the value of land and property sold at a higher value. But, along with VAT, black money is continuing and will continue. GST cannot make any dent on the system, as black money depends on the circle price fixed by states.
Australia, Canada, Singapore and New Zealand have introduced this. These countries are not comparable to India, which has so much of rich-poor content. The large majority of countries have not introduced it.
The proposition that incremental revenue from taxation of land will help keep the GST revenue-neutral rate low is wrong. Since revenue from real estate has to be generated, the final rate could even be higher.
Several constitutional amendments will be necessary, as stamp duty and registration fee are the exclusive domain of states. Entries 63, 18 & 49 of the States List would have to be amended and brought to the Concurrent List. Article 366 will also have to be amended. So many amendments will create tremendous strife between Centre and states, which might argue that it will upset the balance of federalism. It will be impractical to introduce such sweeping change in the Constitution.
Conclusion: It is the most inappropriate time to consider if real estate is to be brought in to the scope of GST. It is better to improve upon whatever GST has been done. Even later, it does not deserve inclusion, though the subject deserves to be discussed.
The writer is member, Central Board of Excise & Customs (rtd)