Construction companies and realtors could be punished by the Goods and Sales Tax (GST) authorities if they don’t disseminate input tax credit to the end-users by cutting off the property price. Now property buyers, especially buyers of the apartments won’t have to bear any additional hidden price in name of tax payments.
Reportedly, the Central Board of Excise and Customs at Delhi and its offices in other states have received several complaints from homebuyers who have booked apartments or made part payments after July 01, 2017. According to the filed complaints, these people were asked to pay a higher tax for instalments paid after the afore-mentioned date.
Explaining which GST commissioner, Vizag, N Srujan Kumar said, “This is against the GST law. Action will be initiated under profiteering section 171 of the Good and Services Tax Act against developers who collect higher tax on instalments of flats under construction. Therefore, the developers are advised to pass on the benefits of input tax credit to the buyers by reducing the price of the flat.”
The profiteering sector of the unified tax regime says, the registration of the errant developers can be cancelled and the developers are also asked to refund extra money collected from the home buyers in name of tax collection. The Act also necessitates the authorities to pass order asking developers to cut down property price and pass on the tax credits to the buyers in the future. Realtors pass on the tax benefit to the end-users, while they are refilling this breach with oversized installment money taken from the home buyers.
As per the GST commissioner GST levied on the construction of flats, buildings and complexes are somehow undersized than some central and state indirect taxes payable by the developer under the pre-GST regime which includes- central excise duty, VAT, entry tax and taxes on construction materials which initially were paid by the developers and they ended up passing those on to the home buyers. As under GST the full input credit is available for the developers, they shouldn’t pass on the taxes on construction materials to the customers; rather they should pass on the tax benefits by lowering the property price or installments.
The complaints being received by the GST offices across the country narrates some other story where developers are continuing to pass on the 2.5% input tax to the buyers. Again, they are charging higher tax or instalments from the buyers in several states. On their defence, developers are saying passing on the tax benefit to the buyers and ascending price of raw materials of the construction are two different subjects to be considered and somewhere the government is mixing up these two. While transferring 12% GST to the government, the input tax credit benefit ranging from 4.5-5% is too being passed on to the buyers. Developers affirmed that they have to wait until the end of this financial year for input tax credit calculation purpose and only then they can reach any conclusive decision on the same. The constant problem which has been bothersome to the developers is increased price of construction raw materials such as- cement and steel.
However, it’s worthwhile mentioning that apartments that are ready for possession along with occupancy certificates are exempted from GST ambit. Consumers are asked to pay 12% of GST for apartments without occupancy certificates.
-LNN (Liyans News Network)- Invest in on-hand low budget flats in Kolkata to avail maximum GST benefit. Explore 2/3bhk flats ranging in 28-40 lac spread over prime areas in Kolkata. Buy/Sell/Rent properties across 100+ cities in India.