Flat Builders Use Smart Technique for GST Evasion

Builders and buyers have found out the new ways to save 12% GST for under construction flats. As under construction projects engage with difficulties in possession holding, further an introduction of GST in this field has reduced the demand for such projects. Now, some builders have come up with the new ways to attract the future buyers.

A builder in Mumbai described how they display the booking amounts of buyers in the form mentioning as a loan from a subsidiary company and after the completion of the construction, the building gets the audit certification, then the builders show that they have returned the full amount to a subsidiary company with interest. After, the clients purchase the flats by paying this amount to a construction company.

This plan works perfectly as GST is not applicable on OC, while the under-construction flats attract 12% GST. And affordable housing segment is liable to tax at 8%.

Property experts also mention that some builders receive money from the purchasers in different account or company and when the OC completes, they transfer it to a flat cell. They as well need to work cautiously, if the construction delays and builder can go away from the promise.

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Anuj Puri, chairman of a consultant firm, mentioned that GST is considered a neutral with the effectiveness of input tax credit benefits, but because of confusion regarding the amount and exact time to get the GST benefits, the builders are searching for the ways to escape from GST applicability.

He further mentioned that the other ways are also there such as builders deal with home purchasers and when the developers get OC, they annul the deal. After that, they go under a new agreement between two parties. Famous and big builders are afraid of getting enclosed in legal default, but small developers are coming up with such approaches to escape from GST and to attract more of customers.
He also mentions that many home purchasers are trapped in the net of fraud developers while dealing in such cases.

Puri further said that rules are strict under GST and there is also norms to punish such actions, therefore it is not going to disburse at the big level. To maintain the purity of the market, now it is required that the government should deal with such builders under legal terms.

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Although, the builders involved in the luxury tower project in Mumbai denied such actions in the company. They further mentioned that their customers do not have any issue in paying 12% GST as they will get the benefits in terms of input tax credit later.