Inclusion of the real estate sector in the proposed goods and services tax (GST) regime -- which seeks to make the whole country a single market -- will bring down property prices by a whopping 20%, according to 13th Finance Commission chairman Vijay Kelkar.
"The present system of levying stamp duty on property deals will go away once realty is included in the GST, and our internal studies point out that prices for consumers will come down by 15 to 20% if this is done," Kelkar told PTI in Mumbai over the weekend.
The ex-finance secretary's comments come a fortnight ahead of the budget, as all eyes are on finance minister Pranab Mukherjee's speech of March 16 which may present a roadmap for the roll-out of GST.
Kelkar also pointed out that the original report of the 13th Finance Commission calls for inclusion of real estate sector in the GST's ambit.
States, which have been stalling implementation of GST for the last two years, get a sizable revenue from stamp duties on property sales, but Kelkar said they will be compensated.
Even after the states are compensated, there will be savings at the ultimate consumer-end, he said.
Getting realty under the GST will remove various non-transparent, "crony capitalism" practises and make the entire system more efficient, Kelkar said.
"To allay their fears, we can adopt an approach wherein GST in realty can be implemented in a phased manner. I hope the GST will be implemented in two years, if not one. Realty can be included later in the ambit, but what is important is that the intent is made sure at the beginning itself."
Even for realty, transactions on the commercial side can be included in GST to begin with, and residential property can come under the fold later on, he said.
Terming the GST as the "mother of all reforms", Kelkar said its inherent qualities of being fair, progressive and equitable with minimal transaction costs make it an ideal law. Up to a whopping $500 billion benefit will accrue to the economy through additional output, he added.
At present, the multitude of taxes make our manufacturers uncompetitive on the global stage, Kelkar said.