The homebuyers who cancel the buying of the under-construction home post furnishing the purchase cost and goods and service tax (GST) shall obtain a refund via the government.
In the 48th GST council meeting, no mechanism would be there to claim for the tax refund that is delivered via unregistered purchasers in matters in which the contract for the supply of services like construction of a flat or house and long-term insurance policy would be refused along with that the time duration of the issuance of credit note via the related supplier lapses.
The majority of the purchasers of the home would not be enrolled under the GST law with tax authorities. The GST Council recommended the amendment of the Central GST Rules, 2017 and the issuance of a GST circular to provide the procedure for claiming a tax refund in such type of cases, the Council specified.
Experts specified the same would be a positive for consumers of services such as persons buying houses under construction. As an example, an individual purchased a house under construction for Rs 1 crore on March 31 and paid a GST tax of Rs 5 lakh on it. In spite of this, he cancelled the deal on December 17,
As on Nov 30, the stipulated period to issue the credit for the builder would lapse hence the builder shall not refund the GST amount to the consumer and the consumer stands on the Lose of Rs 5 lakh of GST furnished.
According to the GST Council, these consumers will directly receive their refunds from the government in very few cases. In due course, a procedure will be put in place regarding this.
Towards the supplies that would be incurred in the fiscal year, CGST law allows the credit notes issuance by the date 30th November which complies with the finish of the former fiscal year. As per that when the flat was booked on March 2022 and cancelled in Dec 2022 the credit issuance shall not be allowed as the cancellation would be after the last date of 30th Nov.
Under the GST law, tax refund applications can be made within 2 years from the relevant date (payment of tax or receipt of services), tax experts mentioned.
The supplier (developer) could potentially exercise the other option of claiming a refund. As far as ‘unjust enrichment’ is concerned, a real estate developer can request a GST refund only if the particular tax was refunded back to the home buyer.
