In the 34th meeting, the GST Council gave a green signal and finalised the modalities for changing the new tax rates on residential flats, thereby giving the builders options to choose. As per the new law, developers have options to choose between the newer rate without ITC or older rate with ITC. The options are-
- Old rate of 12 per cent with ITC
- The new rate of 5 per cent without ITC
This updated GST is confusing the home buyers a lot and they are facing problem in calculating the revised GST.
The affordable housing community has been given a deadline to choose either the old GST which is with ITC or choose the new GST rates without ITC till 10th May 2019. Till now, the ratio of selecting the older GST rate is more than the newer GST rate.
Harvinder Sikka, MD, Sikka Group said “For projects which were launched before April 2019, developers would prefer to stick to the old GST rates. It may not be possible to work on financial matters if the new GST rate is applied on older projects”.
In the meantime, homebuyers are getting more flexibility in comparison to their offerings in the interest of the developers.
Piyush Ranjan, a homebuyer from Noida said “It is not clear how much it is going to affect us. The new rates seem lucrative, but we are in the dark as to how much it is going to benefit us if we stick to the new GST rates. I believe that the GST Council should have left the platform open for the buyer to decide which GST rates they want even in the projects launched before April 1, 2019. Right now, the buyer has no choice but to go with whatever the developer decides”.
Experts had already alerted about the possibility of confusion. Ankur Dhawan, Chief Investment Officer, PropTiger had speculated before GST ruling that “Customers prefer reduced rates whereas developers might prefer higher rates with an input tax credit. We can expect many more disputes and cases in the anti-profiteering authority in the coming days”.
