21 October 2016 12:02 am
A section of condominium developers in the country are crying foul over the proposed amendments to the Value Added Tax (VAT) law for making apartments sold by developers catering to the luxury market VAT-free, while other BOI developments supplying to the lower, middle and premium segments are subject to VAT on their sales.
The recently gazetted VAT amendment on the sale of apartments proposes to exempt VAT from luxury condominiums built by strategic development projects and mixed use/partial developments. The proposed VAT Amendments Bill gazetted on 9th September 2016, has now been presented to the Parliament for approval.
A section of condominium developers say that the proposed amendments to the VAT law distort the market, creating an uneven playing field by discriminating among developments and developers.
The amendment proposes to exempt strategic development projects and mixed use/partial developments from VAT, exempt BOI approved projects below the value of US $ 5 million from VAT and all other BOI-approved projects above the value of US $ 5 million to be subject to VAT.
Industry experts recommend VAT to be exempt from all residential developments—whether BOI or non BOI or strategic development or mixed use developments,thus making housing more affordable.
Alternatively, they propose to charge the same VAT rate on all residential developments, thus making an even-playing field among residential developers and developments. Further, they propose the authorities to introduce a VAT rebate scheme, as practiced successfully in India, by reducing the VAT rate on smaller apartments thereby making housing inexpensive to the lower income segment.