Effective tax rate on complex, building, flat etc.
It is brought to the notice of buyers of constructed property that there
is no GST on sale of complex/ building and ready to move-in flats where sale takes
place after issue of completion certificate by the competent authority. GST
is applicable on sale of under construction property or ready to move-in flats where completion
certificate has not been issued at the time of sale.
2. Effective rate of tax and credit available to the builders for payment
of tax are summarized in the table for pre-GST and GST regime.
|
Period
|
Output Tax
Rate
|
Input Tax Credit details
|
Effective
Rate of Tax
|
|
Pre- GST
|
Service Tax : 4.5%
VAT : 1% to 5%
(composition scheme)
|
Central Excise on most of the construction materials : 12.5%
VAT : 12.5 to 14.5%
Entry Tax : Yes
|
No input tax credit (ITC) of VAT and Central Excise duty paid
on inputs was available to the builder for payment of output tax, hence it
got embedded in the value of properties. Considering that goods constitute
approximately 45% of the value, embedded ITC was approximately 10- 12%.
|
Effective pre- GST tax incidence : 15- 18%
|
GST
|
Affordable
housing segment : 8%,
Other segment : 12% after 1/3rd abatement of value of land
|
Major construction
materials, capital goods and input services used for construction of flats,
houses, etc. attract GST of 18% or more.
|
ITC available and weighted average of ITC incidence is
approximately 8 to10%.
|
Effective GST incidence, for affordable segment and for other
segment has not increased as compared to pre- GST regime.
|
3. Housing projects in the affordable segment such
as Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of
State Government etc., attract GST of 8%. For such projects, after offsetting input tax credit, the
builder or developer in most cases will not be required to pay GST in cash as
the builder would have enough ITC in his books of account to pay the output
GST.
4. For projects other than affordable segment, it is
expected that the cost of the complex/ buildings/ flats would not have gone up due to implementation of GST. Builders are also
required to pass on the benefits of lower tax burden to the buyers of property by way of reduced prices/ installments, where effective tax rate has been
down. Press Release, dated 8th December, 2018
|
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