Builders are facing a piquant situation with homebuyers insisting that they will pay only the new rate of 5 percent GST on flats even though the developer has opted for the old rate of 12 percent to take advantage of credit on inputs like paints, cement and steel. As part of rationalisation of the Goods and Services Tax (GST) on real estate sector, the GST Council has allowed builders to migrate to 5 percent rate for residential units and 1 percent for affordable housing without the benefit of input tax credit (ITC) from April 1, 2019. For the ongoing projects, builders have been given the option to either continue in 12 percent GST slab (8 percent for affordable housing), with ITC, or opt for 5 percent GST rate (1 percent for affordable housing) without ITC.
Although most of the builders have opted for 12 percent rate for ongoing projects to avail the benefit of credit of taxes paid on inputs, the customers are insisting that they would only pay the lower GST rate of 5 percent. “In the transition phase, there is resistance from buyers to pay GST as per the old rate. We are convincing them and explaining to them about the transition framework approved by the GST Council,” said Satish Magar, the newly-elected president of realtors’ apex body Credai. Getamber Anand, the past chairman of Credai, also said buyers are insisting on paying the new reduced GST rate and builders are exploring options on how to deal with this issue as they have to claim ITC.