Reversal of Input Tax Credit for Under Construction Houses
Mar 28, 2019 Real Estate News
For the houses that are under construction, the input tax credit is about to lapse on April 1, and therefore, the input tax credit that is lying with the developers will be reversed to the buyer.
The developers are supposed to reverse the input tax credit for the under-construction houses, as the benefit available to them for the same will lapse on March 31st. From April 1st, new rates will apply without input tax credit where 5 percent will be charged for GST on under construction houses and 1 percent for affordable housing segment.
The move was introduced last month, and the developers will not be able to claim the input tax credit under the scheme.
The properties whose construction has been completed do not have GST applicable but stamp duty. The GST council has decided to reduce the GST applicable on the houses to 5 percent. For affordable houses, the GST applicable now will be 1 percent. Initially, the GST applicable for under construction houses were 12 percent and that for affordable housing segment was 8 percent. The drastic reduction in the tax is welcomed warmly by the potential buyers.
A member of the Central board of Indirect Taxes and Customs said that the government is mulling two- three models for calculating the same.
Although the move is welcomed, some have opposed it as well. The opposers have stated that the real benefit of the GST will accrue only when the higher rates on raw materials such as cement, steel are neutralised. They are also insisting that the input tax credit shall not be returned and the return credit should be allowed for utilisation with other tax liabilities.
Industry sources are debating on the same, stating that the input tax credit shall not be returned for unused credit. The government cannot demand the used credit before April 1st for the houses and projects that are under construction. The debate that the government will force this decision on the builders seems a bit unfair. But in retrospect, all the laws and decisions by the government are forced.
The developers are supposed to reverse the input tax credit for the under-construction houses, as the benefit available to them for the same will lapse on March 31st. From April 1st, new rates will apply without input tax credit where 5 percent will be charged for GST on under construction houses and 1 percent for affordable housing segment.
The move was introduced last month, and the developers will not be able to claim the input tax credit under the scheme.
The properties whose construction has been completed do not have GST applicable but stamp duty. The GST council has decided to reduce the GST applicable on the houses to 5 percent. For affordable houses, the GST applicable now will be 1 percent. Initially, the GST applicable for under construction houses were 12 percent and that for affordable housing segment was 8 percent. The drastic reduction in the tax is welcomed warmly by the potential buyers.
A member of the Central board of Indirect Taxes and Customs said that the government is mulling two- three models for calculating the same.
Although the move is welcomed, some have opposed it as well. The opposers have stated that the real benefit of the GST will accrue only when the higher rates on raw materials such as cement, steel are neutralised. They are also insisting that the input tax credit shall not be returned and the return credit should be allowed for utilisation with other tax liabilities.
Industry sources are debating on the same, stating that the input tax credit shall not be returned for unused credit. The government cannot demand the used credit before April 1st for the houses and projects that are under construction. The debate that the government will force this decision on the builders seems a bit unfair. But in retrospect, all the laws and decisions by the government are forced.
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