If you are planning to buy a house or to invest in the real estate sector, knowing how tax rates changed after the implementation of the Goods and Services Tax (GST) is important. To ensure that a person is not misdirected under the new tax regime, the Central Board of Excise and Custom (CBEC) on Thursday came up with clarity on GST rates that are being levied on the real estate.
Here’s what you need to know about the GST rate on the real estate:
1. No GST is applicable to the sale of ready to move-in or completed property, such as properties where the entire consideration has been received after issuance of the completion certificate.
2. The effective rate of the GST payable on the purchase of an under-construction residence or commercial properties from a builder involving the transfer of property in land or undivided share of land to the buyer is 12% with full Input Tax Credit (ITC).
— CBEC (@CBEC_India) December 28, 2017
What is Input Tax Credit (ITC)?
Input Tax Credit is the tax paid on input, or say raw materials. Under the GST, there is a provision that the total amount of tax paid on input (raw materials such as cement, bricks etc) is offset against the total amount of tax paid on output (building). So, a builder is eligible for availing full input tax credit from the government, but under Section 171 of the CGST Act, any reduction in tax rate on the supply of goods and services or the benefit of the input tax must be passed to the consumer by the reduction in prices.
If any builder is not passing the ITC benefits to customers, a complaint can be lodged with the National Anti-Profiteering Authorities. The anti-profiteering authority, if it finds that a builder has not passed on GST benefits, will direct it to pass on benefits to consumers or may take action against it.
You can file the complaint by filling out a form before the standing committee or state level screening committee. You would also need to attach self-attested copies of all documentary evidence like proof of identity, invoice, price List, detailed working sheet etc. You can download the form from Central Board of Excise and Customs website, or from this link: https://www.cbec.gov.in/resources//htdocs-cbec/gst/format_%20for_filing_anti-profiteering_application_new.pdf