Strategic development projects exempted from VAT

Friday, 21 October 2016 00:01 - - {{hitsCtrl.values.hits}}

The recently gazetted VAT amendments on the sale of apartments proposes to exempt VAT from luxury condominiums built by strategic development projects and mixed use/partial developments.

The Industry is perplex by these amendments that makes 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 proposed VAT amendments to the Value Added Tax Act gazetted on 9 September has now been presented to the Parliament.

It was observed that the proposed amendments to the VAT law distort the market, creating an uneven playing field by discriminating among developments and developers.

The recent amendment proposes to:

Exempt strategic development projects and mixed use/partial developments from VAT.

Exempt BOI approved projects below the value of $ 5 m from VAT.

All other BOI approved projects above the value of $ 5 m 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, charge the same rate of VAT on all residential developments thus making an even playing field among residential developers and developments.

Further, it was commented 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.