Works Contract for construction of Flats, Complex — Builders to pass on GST benefit to buyer otherwise anti-profiteering provisions of Section 171 of GST Act to apply
F. No. 296/07/2017-CX.9 Dated:- 15-6-2017 Clarifications / Instructions / Orders
GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Excise & Customs, New Delhi
Dated 15/06/2017
The C.B.E. & C. and States have received several complaints that in view of the works contract service tax rate under GST at 12% in respect of under construction flats, complex etc., the people who have booked flats and made part payment are being asked to make entire payment before 1st July, 2017 or to face higher tax incidence for payment made after 1s
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position scheme. Thus, there is cascading of input taxes on constructed flats, etc.
3. As a result, incidence of Central Excise duty, VAT, Entry Tax, etc. on construction material is also currently borne by the builders, which they pass on to the customers as part of the price charged from them. This is not visible to the customer as it forms a part of the cost of the flat.
4. The current headline rate of service tax on construction of flats, residences, offices etc. is 4.5%. Over and above this, VAT @ 1% under composition scheme is also charged. The buyer only looks at the headline rate of 5.5%. In other cities/states, where VAT is levied under the composition scheme @ 2% or above, the headline rate visible to the customer is above 6.5%.
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