After the government announced a cut in goods and services tax (GST) on under-construction houses without extending input tax credit (ITC), realty developers have sought clarifications on many grey areas which may lead to future litigation.
According to the realtor body National Real Estate Development Council (NAREDCO), the confusion includes doubts on GST levied on development rights, including transferable development rights (TDRs), development rights certificates (DRCs) and joint development agreements (JDAs).
“What if some units are being sold after the project is completed? Being a completed project that has already received occupation certificate, it will not attract GST. Will the JDA or TDRs used in this project still attract intermediate tax? We need to get clarity on this,” said Niranjan Hiranandani, national president, NAREDCO.
The realtor body has written to the Ministry of Housing and Urban Affairs seeking clarity on this since details of the scheme are yet to be worked out by an officers’ committee. Developers have already offered to make a representation to avoid confusion or litigation later on. NAREDCO is of the view that the condition to receive the exemption — “only for such residential projects on which GST is payable” — may lead to litigation.
Meanwhile, the finance ministry has already announced that the GST Council will have one meeting to clarify these issues. Before that, the Council will meet the builders’ lobby as well.
The government had decided to more than halve the GST rates for under-construction projects to 5 per cent from 12 per cent. While the GST Council removed input tax credit, GST on affordable housing was reduced to a marginal 1 per cent along with expanding definition of such homes.
Exemptions in doubt
It is proposed that intermediate tax on development rights will be exempted only for residential projects on which GST is payable
NAREDCO has written to the governemnt seeking clarity since details of the scheme are yet to be worked out by an officers’ committeee
If clarifications are not made, this might lead to litigation later