GST Council offers two options for realtors

GST Council
The GST Council in its recent decision has stated that real estate developers with unsold housing inventories can now choose either the old rate or the new one if the project is still under construction as on March 31. The decision also cleared the air on possible loss in input-tax credit for projects that are underway if realtors choose the new rate structure. The Council approved a formula, based on four parameters, which will determine the extent to which tax credit can be claimed on purchases for constructions. In addition, the Council also decided to term a project with up to 15 per cent commercial space as a residential property for the purpose of the new rate structure. Developers will get about 15 days to a month to decide on the option, but the exact time would be decided over the next few days in consultation with states. This is precisely to solve the problem of unsold inventory as realtors can now weigh the option that benefits the market the most, said Revenue Secretary Ajay Bhushan Pandey, adding that the four factors would include the extent of completion of the project, extent of booking of apartments by buyers in the project, extent of invoicing of purchases for that project, and the proportion of residential space in the project. Using the formula, input-tax credit would be reversed or be usable on a proportionate basis. If the input-tax credit derived from the formula exceeds what is claimed till March 31, the developer would be eligible to claim the difference. If the derived value is less, the developer would need to reverse a part of the credit. No amount of the input-tax credit will lapse if this formula is used. M S Mani, partner at Deloitte, said the sector welcomes the decision, albeit with a rider of uncertainty about cost escalation. The pragmatic move to segregate under construction projects from new projects would provide relief to builders who were worried about the loss of input tax credit.

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