As we all know real estate sector has gone through a sector-threatening attack after GST implementation. GST has both benefits to society at large and few dark areas. Further GST in its nature is very volatile and keeps changing every other day.
There is a recent amendment to GST applicablity on affortable housing schemes.The Central government recently said the Builders should not collect goods and services tax (GST) from buyers of affordable houses.
The GST Council, on its last meeting, had extended the concessional rate of 12 percent GST for construction of houses under the Credit-Linked Subsidy Scheme (CLSS) to promote affordable housing, which has been given infrastructure status in 2017-18 Budget.
The effective GST rate, however, comes down to 8 percent after deducting one-third of the amount charged for the house, flat, towards the land cost. This provision has effective from January 25.
“All inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18 percent or 28 percent. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 percent. As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST…,” a finance ministry statement said.
The ministry also said that a builder can recover GST from home buyers only if the cost of the flat is “recalibrated after factoring in the full tax credits available in the GST regime” and the ex-GST price of flats is reduced.
It was further said that the builders have to scrupulously follow the anti-profiteering principles laid down under Section 171 of the GST Act. The provision mandates that any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.
Expert Jurist LLP
