The consumers will have to shell out more for the ready-to-occupy flats under the GST system as developers with large unsold inventories are planning to pass on the higher tax burden to homebuyers.
However, new flats will cost less, giving some breather to the developers of upcoming projects.
Under GST, the effective tax on under-construction projects has gone up to 12 per cent.
The actual GST rate is 18 per cent on realty, but allows one-third of the tax to be deducted from the land value, from the total cost charged by the developer.
The GST gives an option of getting full input set-off credit, which is not applicable to ready-to-move-in flats and as a result, developers will have to bear the burden of higher tax or pass on to the end-consumers or increase the overall prices to match the new tax burden, say developers.
“While developers might still get some benefits for projects that are in nascent stages, they will have to bear the tax burden for the ready-to-move-in projects since they are kept out of the GST ambit,” House of Hiranandani Chairman and Managing Director Surendra Hiranandani said.
Gera Developments Managing Director Rohit Gera said under the GST regime, tax on under-construction projects would be 12 per cent, an increase of 6.5 per cent for buyers.
“There is an option of getting full input set-off credit on all input side if GST is paid by them, but this is not applicable on ready-to-move-in properties,” he said.
The consumer durables industry is expecting only a marginal price revision despite the category being placed under the highest tax slab of 28 per cent under GST, as players look forward to the festive season, which accounts for up to 35 per cent of the sales.
