The 23rd GST Council meeting which introduced 2019 GST rates on Real Estate at 5% for Residential properties and 1% for Affordable Housing Properties has set the deadline for adoption of the new GST rates as of May 10, 2019. The decision to adopt old rates with an input tax credit or new rates must be communicated by the real estate firms to their respective jurisdictional officers. In the case of someone missing the deadline, they will be automatically migrated to the new GST slabs.
A notification has been issued by the central board of Indirect taxes and Customs (CBIC) giving real estate firms an ultimatum to choose either the Old or the New GST rates.
Realtors choosing to adopt the new GST rates must firstly accumulate their books of accounts with regards to the old Input Tax Credit and must repay the overused credits if any, in 24 instalments to the government as per the CBIC.
Partner at AMRG & Associates, Rajat Mohan said, “Builders opting for the lower rate of taxes with effect from April 1 would have to recalculate eligible tax credit since the inception of GST based on the proportion of residential to commercial carpet area, sold to unsold units and invoiced to the un-invoiced amount.”
"Based on the factual data if tax credit has been availed beyond permissible proportion, then such excess needs to paid back to tax authorities. In quite a few cases, such tax payment would be magnanimous, especially where the project is nearing completion, but unsold units lying in inventory are high. This will have a high tax risk on real estate sector and many may experience the worst cash flow position since the inception of GST," Mohan said.
Also, the CBIC has instructed builders to maintain a project-wise account of inward supplies from registered and unregistered suppliers as well.
As per latest Indian Real Estate Trends, there is a disadvantage to the old GST as realtors are now liable to produce project wise break up of any procurements and outward supplies so as to recalculate admissible tax credits. This whole process will burden the taxpayer due to the need to update multiple tax records on a regular basis which will definitely impact Ease of Doing Business negatively.
Hence realtors have been advised to adopt the new and lower GST rates as its easy to implement and beneficial to the Indian real estate market.
Homes247.in Experts View
We at Homes247.in suggest our homebuyers and realtors as well to implement and follow the new reforms in GST which are being seen as a welcome move in the current real estate market.
With the Government focused on the Housing for All initiative and constant introduction of new reforms to boost the market, the market has been never been better for real estate investments.