There is no denial to the fact that the Goods and State Tax regime has made the trade & commerce all the more progressive and consumer centric. However, the real estate sector is one of those realms in economy where this user friendly tax policy is not yet ruled out all the complexities. The other 2 composite spheres where GST has not been fully effective are petroleum and alcohol.
Currently the buyers of under-construction properties are facing intense confusions and tax burden due to complex GST structure in case of real estate projects.
Experts have now pointed that these complexities are going to increase the cash crunch among the builders & developers and affect the ease of doing business.
|S.No.||Description of Services||GST Rate|
|1.||Construction of a civil project or a part thereof, for sale, wholly or partly.
[The total amount charged from buyer is inclusive of the cost of land.]
|12% With Input Credit (but no refund of excess ITC)|
|2.||Composite supply of Works contract as per section 2(119) of CGST Act 2017.||18% With Input Credit|
|3.||All other services in real estate||18% With Input Credit|
The GST liability on the entire project is incurred by the builder. The Builders having GST registration always gets refund of their input tax credit (ITC). Hence, under normal circumstances, the builder does not pass on the entire tax burden onto the buyer.
As discussed above, the GST is charged on the under construction projects only, this includes flats sold across India. Here, the buyer has to pay GST@12% of the agreement value. No GST is levied after the project gets final completion certificate.
Many buyers are now opting for the finished homes or opting for old ones to avoid the GST liability. This is ultimately is restricting the cash flow of realtors having GST registration, according to experts.
The whole problem is due to the break-up of the cost of the project. The cost of land is kept out of the GST Ambit.
Thus, the government has to carefully take into account these challenges and improvise the GST structure in real estate sector.