With most of the building projects in doldrums builders are once again trying to fleece the buyers by claiming that for all the unpaid dues they will be charged as per GST, which will be higher.
The unregulated real estate sector is once again trying to extract money from home buyers in the name of GST. With most of the building projects in doldrums – in some projects not a single brick has been placed – builders are once again trying to fleece the buyers by claiming that for all the unpaid dues they will be charged as per GST, which will be higher.
However, experts have a different opinion. “Even if a buyer has some dues against the invoice already raised, GST won’t be applicable on the outstanding dues. Builder must have paid the service tax (4.5 per cent) and VAT (1 per cent) against that invoice, and so can’t charge additional tax in the name of GST,” said Vikrant Singh Shishodia, a real estate consultant.
In fact, experts say that home buyers should demand from the developers to pass on the credit benefit for rest of the project to the final customer, as the government has included an antiprofiteering clause in the GST bill under section 171 of GST law. “By introducing Input Tax Credit, the end consumer will only bear the GST charged by the last dealer in the supply chain, with set-off benefits at all the earlier stages,” Anurag Ranjan, a chartered accountant, told Mail Today. He added that after subtracting Input Tax Credit, service tax and VAT and then adding GST, the figure may be less than that of pre-GST figure.
Meanwhile, some builders made phone calls to their customers and asked them to pay dues before July 1 to save additional tax because of the implementation of GST. “My builder has sent me a letter requesting to pay all dues. Although it had not mentioned GST as the reason, but highlighted its inability to complete the project because reduction of fund flow due to demonetisation,” said Rajeev Sharma, who booked his flat at Cloud 9 in Vaishali.
Many builders are hopeful about GST and expecting a positive impact. “One nation one tax (GST) will have a positive impact and bring more transparency in the tax system and its benefits must pass on to consumers. It will be a major booster for the Indian Economy. After GST gets implemented, property prices will not have any impact for home buyers. The benefits of input credit tax and simplifying double taxation effect will be instrumental for both developers and the end consumers”.
A few developers believe that for ongoing projects there won’t be much benefit to the home buyers. “Although GST will have a positive impact on the prices of real estate, it will be applicable for the projects that will be undertaken after the implementation of the GST regime. It is important to note that the developers will not be able to take full credit of taxes paid by suppliers for the projects that are under the transitional phase, as traders were not issuing the excise invoice for the materials bought from them by the developers,” said Ashish Sarin, CEO, Alpha Corp.
Under the GST regime, all under-construction properties will be charged at 12 per cent (excluding stamp duty and registration charges). It will not apply to completed and ready-to-movein projects, as there are no indirect taxes applicable in the sale of such properties.