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Real estate developers have asked the government not to charge 18% GST on floor space index (FSI) and additional FSI charges. They say this tax will raise housing prices by up to 10% and reduce demand, making homes less affordable.

FSI, also called floor area ratio (FAR), decides how much building can be done on a piece of land. The GST Council is set to discuss this proposal at its 55th meeting on December 21 in Jaisalmer, Rajasthan.

Why Developers Are Worried

The builders’ group, CREDAI, has written to the Finance Minister, warning that this tax will increase costs for projects and homebuyers. If the GST is applied to FSI charges, either for past or future projects, it could create financial problems for developers and lead to delays in construction.

Retrospective taxation—charging GST for past payments—would be especially harmful. Developers would face large unexpected costs, affecting projects already underway or completed.

Impact on Housing Prices

The builders also said the tax would make affordable housing projects too expensive to build. This would hurt middle-class homebuyers, who make up 70% of the market.

Developers also cannot claim input tax credit (ITC) on GST, meaning they would face double taxation. These extra costs would be passed on to buyers, making homes even pricier.

CREDAI's Appeal

Boman Irani, president of CREDAI, said FSI charges are a big part of project costs, and taxing them will hurt both developers and buyers. He urged the government to keep FSI charges outside GST to prevent home prices from going up.

CREDAI also pointed out that FSI charges are managed by local authorities under the Constitution and should not be taxed under GST.

The real estate industry hopes the government will reconsider the proposal to protect housing affordability and support its goal of “Housing for All.