By Dr Sanjay Chaturvedi, LLB PhD
To avoid GST, few scrupulous builders accept token or advance money in some other account as loan or unregulated deposits from prospective flat buyers. When the project is ready with OC, they convert it into sale and GST is avoided.
The Union Cabinet chaired by Prime Minister Narendra Modi has approved the Promulgation of Unregulated Deposit Schemes Ordinance, 2019. The proposed Ordinance will immediately tackle the menace of illicit deposit taking activities in the country launched by rapacious operators, which at present are exploiting regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings, by altogether banning unregulated deposit taking schemes, and having adequate provisions for punishment and disgorgement / repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
Accordingly, Supreme Court has already ruled that if any money lent over and above 50,000/- without having Money lending licence under Money Lending Act is not recoverable. Hundreds and thousands of cases were lost by the lenders.
The ordinance will curb the deposits made in lieu of earnest money given to real estate builders.