Some Developers Not Passing On Full Benefit Of Input Tax Credit Under GST

Not all developers are passing on the full benefit of the ITC to the consumers, resulting in a dampening of homebuyer sentiment.

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Some Developers Not Passing On Full Benefit Of Input Tax Credit Under GST

Some developers are not passing on the full benefit of input tax credit under the GST to home buyers who have booked flats in under-construction projects, property consultant CBRE (commercial real estate services and investment firm) said on completion of one year of the new indirect tax regime.

The Goods and Services Tax (GST) came into effect from July 1 last year in the country.

Read Also: Low-Cost Houses & Ready To Move In Houses Sales Are Up

The demand for ready-to-move-in flats has gone up as completed projects do not attract the GST, prompting developers especially in South India to launch flats after execution of projects it said in a report ‘One year of the Landmark GST – Impact on the RE (Real Estate) Market’.

GST has had a varying impact on the residential sector as the taxation is different for completed and under-construction properties. As completed projects do not attract GST, there is now a greater appetite amongst home buyers for ready-to-move-in residential units, CBRE said.

The under-construction flats attract 12 per cent GST but the rate is 8 per cent of affordable housing.

Under the GST regime, the completed projects mean not only ready-to-move-in projects but also those that have been granted completion certificates.

Read Also: 1.64 Lakh Government-Constructed Houses Lying Vacant Across India

For under construction projects, CBRE said developers are factoring in the full ITC (input tax credit) that they will receive on construction/development cost to arrive at the right selling price.

But, not all developers are passing on the full benefit of the ITC to the consumers, resulting in a dampening of homebuyer sentiment, CBRE said.

To boost sales, the consultant said that such developers have been devising innovative payment schemes to attract customers such as subvention schemes that provide consumers an EMI holiday until the grant of possession.

CBRE said that those projects launched before July 1, 2017, and in advance stage of construction are unlikely to gain significantly due to the ITC as most of the raw material would have been purchased before GST implementation.

Read Also: Price Of New Homes Launched Gurugram, Jan-May 2018 Increased By 6.5%

However, under-construction projects that are still in the initial stages of construction, would have the flexibility to adjust their price points according to the ITC under the GST regime.

Commenting on the impact of one year of GST on Indian real estate, CBRE chairman, India and South East Asia, said, the coming together of various policy reforms such as the implementation of GST, RERA and easing of FDI norms has significantly eased and streamlined the investment scenario of the country.

Source Link- https://timesofindia.indiatimes.com/

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