Goods and Services Tax – GST – By: – Puneet Agrawal (Athena Law Associates) – Dated:- 27-10-2016 Last Replied Date:- 27-10-2016 – The GST structure as it stands today shall only result in higher property costs for the home buyers. Non‑exclusion of land value from GST net, non-availability of ITC to developers and irrational Valuation Mechanism shall lead to such an anomaly. The Model GST law which has been shared with the stakeholders shall only add up to the woes of homebuyers unless necessary amendments are brought in. The much promoted and discussed benefit of GST i.e., reduction in costs is not extended to the real estate sector. The ill effects would be equally felt by the industry as well as home buyers. It is a glaring fact th
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twice on the same material i.e. – once at the time of purchase by the developer and second when the same shall be included by the contractor for discharging GST which he shall charge from the developers. Same shall be the fate of various services such as architects and engineers arranged by the developer and they shall also be included in the transaction value of the contractor for the computation of GST liability. These would cumulatively add up to result into very high GST because of the cascading effect and would thus be a matter of serious concern, for the homebuyers, for after all developers would pass on his cost to them. The situation is further frustrated by non-exclusion of value of land from the transaction value. In absence of an
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tax and VAT shall be roughly 12.5% of construction value, which totals to ₹ 1,87,500 [12.5% of 15lacs]. Whereas under GST, assuming a tax rate of 18%, tax liability shall be ₹ 9lacs [18% of price of flat- Please note that land is not excluded], which is way too higher than the current tax liability. This is apart from the cost of input taxes, which builder would bear, since unlike in present scenario, he would not be eligible to claim input tax credit on tax paid by his contractors. In other terms, one buying a house worth 50lacs should be ready to dole out another more than 7 lacs as tax, purely due to the structuring of law which could have been avoided. This can be avoided even now in case appropriate action is taken by the
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