GST on under construction property

[Guest]

I am Jitender Kumar and stay in Bangalore, recently we have bought a flat in Bangalore on 29th May with the advance payment of 20% of total cost as booking amount. Builder has provided us payment slab with Service Tax as 4.9% which we have to pay every alternate month from August onward.

Since GST is in place now builder is asking us to pay 12% GST on the pending slab though we have booked the flat before July itself rather than 4.9% earlier service tax. This is creating a burden of additional 4 lakhs on us.

I believe that builder should not ask increased tax slab since we have booked before GST implementation. I am really confused now and thinking that builder is cheating with the customer. I don't know whether builder is right or wrong. I tried to get the answers from many person but getting mixed reviews. Hence I am writing this query here, it would be great help if any one can answer on this

[KASTURI SETHI]

In your case present rate of GST is applicable.

[Vamsi Krishna]

In previous tax regime service tax @ 4,5% (under 26/2012 notification) and VAT (1.25% or 1%) was applicable for sale of construction of Flat (till the date of receipt of Occupation Certificate).

As mentioned the builder should have discharged Service Tax & VAT ( hope Karnataka govt also issued circulars to discharge VAT till date of receipt as against the earlier practice of payment of VAT at the time of Registration) on 20% of the Advance amount that you have paid.

With effect from 1st July under GST, Flat sales are taxed @ 12% effective rate, and GST is liable on 80% of your Flat value @ 12%.

However Builders are given seamless credit in GST regime by allowing Input tax credit tax on all the purchases & services that has been received by him. As per Anti profiteer provisions of GST, he should pass on atleast 3-4% of tax reduction to the buyer.

You can question him the same. He may get a discount/reduction of 4% GST.

[Guest]

Thansk Vamsi Krishna

Information provided by you really helped me to have a discussion with my builder. Builder finally agreed on tax credit benefit and informed all the buyers that Input tax credit to buyer is still under discussion. By month end we should able to get the positive response from builders.

Thansk again.

AI Summary

GST on under-construction property applies to pending payments; builders must credit input tax benefits and prevent profiteering. GST applies to staged payments for under-construction residential units after the GST effective date; prior regime taxes (service tax and VAT) were payable on advances until occupation certificate. Builders may claim input tax credit under GST, and anti-profiteering rules require passing reductions from tax credits to buyers, enabling purchasers to seek adjustments where benefits are not reflected in payable instalments.