Towards having the clarifications and concessions for the problem of double GST payment in redevelopment projects various real estate developers meet with the government, a kind of factor that leads to the rise in the cost during the time when the margins are existing beneath the pressure.
The financial aspects of the redevelopment project is a type of urban real estate restoration technique in which the realty players take the older buildings and build them again; it gets destroyed in some former years upon the execution of the GST in 2017 specified by the industry monitoring people.
“The GST is paid firstly on the cost of construction without the input tax credit, and secondly when the area is delivered to existing residents at market price. Both GST payments are absorbed by a developer, which often becomes a huge cost, a tax expert commented.”
The tax experts specified all the redevelopment projects face issues due to the higher prices. Top real estate developers urged the government for the GST to get easier with them as it is in the way it is imposed on them.
Real estate players specified that they see the issues in the period of the pandemic in the former years with the rise in the rates and decreasing revenues along with the additional issues like labour shortage.
In the critical redevelopment of the project a real estate developer opts for the project and makes it through more space and apartments. In various situations, the real residents return to their apartments with some more space or bigger apartments.
The GST rules have mentioned that it is mandatory that the tax needs to be filed when the developer executes the constructions and there is no ITC available upon such development.
ITC is the kind of process in which the GST filed upon the raw materials can be set off towards the future tax liabilities. Under the statutory guidelines in the case when the original residents do not pay anything on getting the bigger house back and thus a 5% GST must be needed to get furnished.
The GST needs to get furnished under the market price upon the flats or apartments. As nothing is being paid through the original buyer then the real estate developers might have to bear these costs.
The experts from the industry specified that some of the biggest redevelopment markets consist of Mumbai who are seeing the real estate developers ignoring to redevelop the projects. Before that the real estate sector sees the hurdles next to the government notification near to the joint development agreements.
Joint development agreements are a mutual feature in the real estate sector in which the owners of the land transfers the land to the real estate developer and collect the apartments in some specific amount of revenue or the alliance of both in return.
The notification provided on the date of Jan 2018 mentioned that the GST was applicable to get paid through both the landowner and the developer. Upon the owners of the land, the GST notification seeks to impose the tax even on that was challenged inside the court.
Real estate developers bring the GST department, central and state governments to court on drawing the same case beneath the issue of the GST framework.
