Reform Stmap duty

The Centre has done well to propose a 5% uniform stamp duty on property transactions across all states. The reform, long overdue, would be an incentive for above-the-board deals. A consensus among states on a uniform stamp duty rate for property transactions will end rate-wars, reduce under-declaration and curb black money generation. More reforms must follow. States should bring the real estate sector under the goods and services tax (GST) regime. The rationale offered by the task force on GST and endorsed by the Thirteenth Finance Commission to integrate the real estate sector into GST is sound. The sector will be free from multiple taxes at the Central and the state level. It will also eliminate cascading of taxes and help better price discovery. Today, credit is not available for various levies paid on real estate transactions at the state level and a buyer does not have an incentive to obtain an invoice. This will change with the introduction of GST as input tax credit will be available across the value chain. The new system will check under-declaration in the valuation of property. There will be an audit trail on all property transactions. It would, therefore, be easy to check tax evasion. Ideally, stamp duty should be subsumed in GST. Sure, states would worry about revenue loss. Together, states collect Rs 40,000 crore from stamp duties. However, the audit trail and incentive to stop undervaluation of property should yield additional tax revenue, even if not collected under the head stamp duty. Any loss of revenue after factoring this in, can be up for compensation by the Centre, again as recommended by the Finance Commission. States were compensated for losses that they in-curred while transiting to the value added tax regime (VAT). VAT ensured better compliance and bolstered revenue collections. The results will be even better in a clean and transparent tax system like GST. It will foster compliance and curb tax evasion, rampant now in real estate transactions.