This is due to the lock-in period and delayed ITC refund from the GST department.
New Delhi: Developers who chose to stick to the old provisions regarding GST rates which come with the option to avail an additional benefit of input tax credit, are finding it difficult to pass on ITC benefits to homebuyers who booked flats in under-construction projects, due to the lock-in period and delayed ITC refund from the GST department.
Earlier this year, the GST Council had reviewed the GST rates and as per the new rules, developers of residential projects which are incomplete as on 31 March 2019, will get a one-time option to either choose the old GST rates of 8% and 12% on affordable housing and non-affordable housing, respectively, with ITC, or shift to the new 1% and 5% rates, for affordable housing and non-affordable housing, respectively, without the ITC.
Rajeev Talwar, CEO, DLF, said: “The Central government has introduced a lot of policy changes to help the real-estate sector but the delays in ITC refund and the lock-in period for availing the same are causing great difficulties for many developers and builders. The lock-in period prescribes for no clearance of ITC claims unless the project is ready. One should know that the completion of a project takes almost four to five years.”
Another developer who requested anonymity told The Sunday Guardian: “We are afraid of action from the National Anti-Profiteering Agency (NAPA) for failing to pass on the ITC to homebuyers but no one is understanding that the real fault lies in the GST rule which prescribes no ITC claim prior to the completion of the project.”
“Although there are many hurdles including the failure of NBFCs, land reforms and the arbitrary orders of the National Green Tribunal, the implementation of GST and demonetisation are the two major changes that have brought the real estate sector to its knees,” the same developer said.
However, this problem is only limited to developers who have opted for the old rates of the GST and not the rationalised rates which were introduced from 31 March.
Over the last few years, the real estate sector has been under a lot of pressure and developers have been forced to increase sales by using tactics of giving good discounts and offers but with the implementation of the GST, even using the same tactics is not easy and this has resulted in a slump in sales in the property market.
Saket Goswami, a real estate associate, told this newspaper: “The removal of ITC under the new norms ensures that homebuyers get the full advantage of the GST reduction. A flat 5% rate of GST without ITC is a better option for homebuyers due to its simplicity and transparency. There is no need to pursue reclaiming of credits after the purchase. But many buyers had opted for the old provision of claiming ITC which is now hurting them.”
As per sources, in the real estate sector, in the last couple of months, the GST department has initiated action against developers who have failed in passing on ITC benefits to consumers. Apart from the GST department, the NAPA has also given several rulings to ensure that developers pass on ITC to homebuyers.