GST – GST Law and Procedure – 255 – Reduced liability of tax on homes under GST The CBEC and States have received many 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 before 1st July, 2017, are being asked to bear higher tax incidence for payments made after 1st July, 2017. This is against the GST law, as explained below. Construction of flats, complex, buildings have a lower incidence of GST as compared to a plethora of Central and State Indirect Taxes suffered by them under the earlier regime. Central Excise Duty was earlier payable on most construction material @12.5%. It was higher in case of ceme
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the flat. The earlier headline rate of Service Tax on construction of flats, residences, offices etc. was 4.5%. Over and above this, VAT @1% under composition scheme was also charged. The buyer only looked at the headline rate of 5.5%. In other Cities/States, where VAT was being levied under the composition scheme @2% or above, the headline rate visible to the customer was above 6.5%. What the customer did not see is the embedded taxes on account of cascading and sticking of input taxes in the cost of the flat etc. The situation has changed under GST. Under GST, full input credit is available for offsetting the headline rate of 12%. As a result, the input taxes embedded in the flat will not (& should not) form a part of the cost of the
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