Homebuyers can’t choose between old, new GST rates, CBIC clarifies

By: |
Published: May 9, 2019 4:23:16 AM

Earlier this year, the GST Council had cut the tax rate for regular housing to 5% from 12% and for affordable housing to 1% from 5%. However, the builders can’t claim input tax credit (ITC) anymore after the concessional rates came into effect on April 1.

Homebuyer, GST, goods and services tax, CBIC, Central Board of Indirect Taxes and Customs, ITC, GST law,  GST liability, PwC India, economy news, financial express, financial express newspaper, financial express today Homebuyers can’t choose between old, new GST rates, CBIC clarifies

Homebuyers will not have the option to choose between old and new goods and services tax (GST) rates as the choice only lies with builders, a clarification issued by the Central Board of Indirect Taxes and Customs (CBIC) clearly stated on Wednesday. It also said a real-estate project that started before April 1 but had not received any booking would be classified as ‘new project’ and subjected to revised GST rates.

Earlier this year, the GST Council had cut the tax rate for regular housing to 5% from 12% and for affordable housing to 1% from 5%. However, the builders can’t claim input tax credit (ITC) anymore after the concessional rates came into effect on April 1.

“It is the builder who has to exercise the option to pay tax on construction of apartments at the old rate of 12% latest by May 10, 2019. If the builder doesn’t exercise his option to continue to pay tax at the old rate by the said date, the effective GST rate applicable on all your (homebuyers’) installments payable to the builder on or after April 1, 2019, as per the contract, shall be either 1% or 5%, depending on whether the apartment is an affordable or other than affordable residential apartment,” the department said.

Further, the department clarified that if a flat booked in earlier scheme (prior to April 1, 2019) got cancelled and credit note was issued as per the GST law, the tax paid related to the sale could be adjusted against any other GST liability. Pratik Jain, partner and leader, indirect tax, PwC India, said: “Developers need to carefully evaluate as to which scheme is more efficient, and clearly communicate to the customers accordingly. There may be situations where one project is registered under RERA but different part of the project (e.g towers) are at different stages of completion (e.g completion certificate has been received for one of the towers and others are still under construction).”

Jain said clarification was needed on whether preferential location charges (PLCs) and other incidental charges, such as club membership and parking, would be given the same treatment or would be subject to GST at higher rate.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1India expects improvement in World Bank’s ‘Doing Business’ ranking this year
2US-China trade war: Donald Trump says China wants to ‘negotiate’ deal
3US, China bilateral trade falls in first four months of 2019 amid trade war; key figures