Reduced liability of tax on homes under GST

CA Pathik Shah, Partner, B. P. Shah & Co.

Many builders are facing the issue that many buyers are asking discount or pass on the benefit of GST. However, builders are getting confused whether builders are actually getting benefit after the introduction of GST.

Also, Central Board of Excise and Customs Department has issued flyer stating that the builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/ installments. It is, therefore, advised to all builders/ construction companies that in the flats under construction, they should not ask customers to pay a higher amount of installment inclusive of all taxes to be recovered after imposition of GST.

In this article, we try to measure the impact of GST and quantify the benefits from GST on the Flat Sales and how much amount they can pass to the purchasers on the Flat Sales.

Before GST, Builders were paying an effective total tax of 5.5% (Vat 1% and Service tax 4.5%) on the Sale Price of Flat towards both Central Service Tax & State Sales Tax/VAT put together. Whereas the present rate of GST on the Sale Price of Flat which is inclusive of both Central GST and State GST is 12%.

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