Real Estate Business is adversely affected in the Delhi NCR, GST for Buyers
After the GST (Goods & Services Tax) rollout on July 1, homebuyers are better off purchasing a flat from a project which applied for, or has already received Occupation Certificate (OC) from the local development authority.
Project which has already received OC is exempt from GST at the rate of 12% of the value of flat. Demand for completed projects has increased. On the other hand these projects has to be registered under RERA (Real Estate Regulatory Authority) also. As of the confusion over the implications of the provisions under RERA, developers are not able to market their projects and the sales have slowed down considerably.
Authorities in Noida, Greater Noida and Ghaziabad are not issuing OCs to completed projects for the last one year as the developers are not sure whether marketing such projects without registering under RERA is permissible.
Developers cannot market a project under construction without registering it with RERA. But a state like Uttar Pradesh is not yet ready with the requisite infrastructure to register a project under RERA. So, developers are left high and dry and business activities in the real estate sector have come to a standstill in the state. Though Haryana has started registration, it has no RERA rules so far.
A project that has applied for OC and is ready for delivery will also not attract GST on sale to end customers. The GST on projects under construction is levied at 12%. Therefore, this is a huge benefit and is an opportune time for end users to buy a ready-to-move-in flat.
Under GST, developers get credit for taxes paid on the inputs purchased after June 30. According to estimates, total tax paid on inputs to complete a project are around Rs 300-400 per sq feet.
Developers are supposed to pass on this benefit to customers by reducing the price by the same amount. But buyers will have to pay GST at the rate of 12% on the final price. For this the entire project should have been built within the GST regime after July 1.