The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has said that the Centre should work with the states to slash the stamp duty on purchase of residential and commercial properties to eliminate the use of unaccounted cash in transactions and save the real estate and construction industry from being stamped as the parking lot for dubious deals.
According to ASSOCHAM, the buyers would be biggest beneficiary of this step. “One of the biggest reasons for the cash forming 30-40% of the real estate transactions is the high level of stamp duty. With 6-7% stamp duty, the purchaser of a flat worth Rs 1-1.50 crore will have to shell out different government levies and other charges like registration, lawyers’ fee to the extent of Rs 10 lakh or so. For a middle class family, which depends largely on borrowed money, this is a huge amount,” ASSOCHAM Secretary General D.S. Rawat said.
According to Rawat, if the state government slashes by at least 50%, it would increase their revenue rather than reducing it.
Lower stamp duty would also revive the demand in the distressed sector which would further be jolted with cash totally drying out from the transactions, he said.
A recent joint paper by the ASSOCHAM and Thought Arbitrage had found prevalence of rampant black money or “untaxed money” in the real estate business, posing a great challenge for the construction industry.
For speedy approvals and sanctions from authorities, builders or contractors are often compelled to pay large sums of money as bribe to government officials, surveyors, engineers etc. A part of the burden is passed on to the ultimate buyer who, has to pay in cash to the contractor.