GST: Builders Asks Full Payment With No Strong Reason

Recently, the government have made some relaxed rules and regulations for the home-buyers and has also asked the builders community to take care of the newly incorporated laws. But recently it was surfaced through sources that the builders are not doing what the government has asked them to do, in fact they are making an exact opposite action of it.

It is known that the builder’s community is asking for a full payment of a flat and apartment before the arrival of GST from July 1st. The reason behind this wicked demand is that the builders are misleading the home-buyers with the fact that the installments and house prices will be increasing after the implementation of GST which is absolutely Not the case.

The Ministry of Urban Development, Housing and Urban Poverty Alleviation wrote a letter to the chief ministers of all the states to ensure this practice must be halted as soon as possible. The letter asked that this illegal practice should be stopped anyhow so that builder could not succeed in making black profits out of gullible home buyers.

The issue was unearthed when the ministry received numerous complaints and representations from the Central Board on Excise and Customs (CBEC) and from the states on the account of buyers who has been complaining that the builders are constantly knocking for the full payments of flats and apartments before the GST implementation in order to avoid any higher tax rates.

Union Urban Development Minister M Venkaiah Naidu clearly stated in his letter wrote to the CM that, “It has been further informed that these activities are against the GST law. The Department of Revenue has clarified that construction of flats, complexes and buildings will have comparatively a lower incidence of the GST if we compare it to a plethora of Central and State indirect taxes under the existing tax regime.”

He is also hoping that the builders will be passing on the newly revised benefits to the home-buyers after the GST, and further said in the letter that, “Hence, I would like to request your State Government as well as the builders’ associations to ensure that no builder/construction company should ask customers to pay a higher tax rate on installments to be received after imposition of the GST.”

Read Also: Problems a Businessman May Face After Goods and Services Tax in India

Currently, the tax scheme and its components like Central Excise Duty, VAT, and Entry Tax on construction material are under the hold of the builders which they pass on to the home-buyers. He added that “This is obviously not visible to the customer as it forms a part of the cost of the flat. The buyer/customer does not see the embedded taxes on account of cascading and sticking of input taxes in the cost of the flats.”

As from the instance of normal transactions, it is ascertained as complete when the goods or services are delivered to the customers and taking from this very same point, he mentioned that “The Department of Revenue has further advised that under the GST, the current scenario will change. Full input credit would be available for offsetting the headline rate of 12 per cent proposed under the GST. As a result, the input taxes embedded in the flat will not form a part of the cost of the flat. The input credits should also take care of the headline rate of 12 per cent and it is for this reason that refund of the overflow of input tax credits to the builder has been disallowed.”

Recommended: Input Tax Credit Guide Under GST: Calculation with Examples

As from the new tax scheme, it is known that the developers will be getting less burden from the input i.e. cement, steel, etc, as tax credits would be available to set off from various stages. An email recently surface by a builders group which was asking for clear the dues stating the extra 7.5 percent as a reason in front of currently paid 4.5% service tax.