Real Estate has been one of the sectors which was majorly impacted by GST. One of the immediate effects were that the overall cost of construction, and thus the effective real estate GST rates went down in the GST era, due to the availability of additional input tax credit for builders. However, what is still missing in the real estate market is the intention of builders to pass on the benefit of the lower cost to the end buyer or consumer.
Reasons behind the clarification
Experts seem to suggest that the main reason behind this notification is the plethora of anti-profiteering complaints, where it was brought to the notice of the authorities that the benefit of lower real estate GST rates was not being passed on to buyers. Cases like these, have prompted the government to issue this notification.
What does the notification clarify?
The 4 main points of the notification are as follows:
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No GST is applicable on the sale of complexes or buildings or ready to move-in flats where the sale takes place after issue of completion certificate by the competent authority
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GST is applicable on the sale of under construction properties or ready to move-in flats where completion certificate has not been issued at the time of sale
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GST of 8% is applicable on housing projects in the affordable segment, such as – Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of State governments etc. The reason behind the same is, that for such projects, after offsetting ITC, the builder or the developer most of the times, will not be required to pay GST in cash, as he would have enough ITC in his books of accounts to pay the output GST
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For projects other than those in the affordable segment, it is expected that the cost of the complexes / buildings / flats would not have gone up due to the implementation of GST. In such cases, it is expected that builders pass on the benefits of the lower tax burden to buyers by way of reduced prices or instalments