GST relief for home buyers
In major relief to property buyers, especially apartments, Goods and Sales Tax (GST) authorities have warned realtors and construction companies of punitive action if they do not pass on the benefits of input tax credit to the buyers by reducing the prices.
N Srujan Kumar, GST commissioner, Vizag, told TOI that the Central Board of Excise and Customs at Delhi and its offices in various states have received several complaints that people who have booked flats and made part payment were asked to pay a higher tax for instalments paid after July 1, 2017.
“This is against the GST law. Action will be initiated under profiteering section 171 of the Good and Services Tax Act against builders who collect higher tax on instalments of flats under construction. Therefore, the builder is advised to pass on the benefits of input tax credit to the buyers by reducing the price of the flat,” Kumar said.
As per the profiteering section of the Act, the registration of the erring builder can be cancelled and the extra money collected from the buyer made to be repaid by the builder.
The Act also entails the authorities to pass orders asking the builder to reduce the price.
According to GST commissioner, construction of flats, complexes and buildings has lower incidence of GST (since July 2017) as compared to some central and state indirect taxes that builders had to pay under pre-GST regime. “Under the previous regime, central excise duty, VAT, entry tax and other taxes on the construction material were being passed on to the customers by the builders. However, under GST, the full input credit is available for the builders. Therefore, builders should not pass on the taxes on raw material to the customers while billing the cost of the flat. Builders are expected to pass on the benefit of lower tax burden due to input tax credit under the GST regime to the buyers of the property by way of reduced prices and instalments,” the commissioner said.
However, as per the complaints being received at the various GST offices, builders are continuing to pass on the 2.5 per cent input tax to the buyer. “Builders are not passing on this benefit to the buyers. Besides, they are collecting higher tax on instalments from the buyers. This should stop henceforth,” said GST commissioner Srujan.
However, builders have a different story to tell. CREDAI AP chapter general secretary ChSudhakar told, “Passing on the input tax credit benefits to the buyers and price of the flat going up due to raw material costs are two different subjects and the government is mixing up both. We will not make a profit out 12 per cent paid by the buyer. We are remitting the 12 per cent GST to the government. We are passing on the input tax credit benefit to the buyer. We are expecting it to be around 4.5 per cent to 5 per cent. We have to wait until the end of the financial year to calculate the input tax credit and only then can we act on it. The problem is that the prices of raw materials have again gone up. For instance, the price of cement that had come down has again increased to ₹280 to ₹290. Due to increase in raw material costs like that of steel and cement, the construction cost has increased. So the prices have been hiked.”