CHENNAI: Cost of houses built using premium floor space index (FSI) may go up in Chennai by nearly 10% soon as the Directorate General of GST Intelligence has initiated a probe into possible tax evasion by builders and promoters who have availed of premium FSI between July 2017 and March 2022.
FSI is the ratio of building floor covered area to land area. It is the maximum permissible floor area that can be built on a particular plot. The provision for permitting premium FSI based on a fee was introduced in the development regulations of the Second Master Plan for Chennai.
According to sources, GST is not charged by both CMDA and Directorate of Town and Country Planning, which are mandated to collect the tax, for premium FSI. The premium FSI is allowed in the Chennai Metropolitan Area excluding Red Hills catchment area, restricted for development, and areas identified as waterbodies by the Chennai Metropolitan Water Supply and Sewerage Board.
“We only pay the premium FSI rate charged by CMDA or DTCP. We don’t pay GST for it,” said Builders Association of India State secretary S Rama Prabhu. The premium FSI charge is collected at 50% rate of guideline value of the registration department for the excess FSI area for Non High-Rise Buildings and at 40% rate of guideline value for High-Rise Buildings.
According to a Union Ministry of Finance note accessed by TNIE, supply of Transferrable Development Rights (TDRs) or floor space index (FSI) or long term lease of land, on such value which is proportionate to construction of residential apartments that remain unbooked on the date of issue of completion certificate or first occupation, would attract GST at the rate of 18%.
But the amount of tax shall be limited to 1% to 5% of value of apartment depending upon whether the residential apartments for which such TDR or FSI is used falls under affordable residential houses apartment category or not. TDR or FSI or long term lease of land used for construction of commercial apartments shall attract GST of 18%. With respect to taxes for FSI, promoters will have to pay them immediately on the day of inset of project for commercial apartments and from the date of issuance of completion certificate for residential apartments.
It is learnt that the Directorate General of GST Intelligence is also probing development rights certificates issued to builders or promoters or land owners in Chennai for premium FSI approved plots. When TNIE contacted a Directorate General of GST Intelligence unit official, she refused to share any information. The CMDA and housing department officials too were not ready to comment.
Tax not levied?
Though the CMDA and Directorate of Town and Country Planning are mandated to collect the tax for premium FSI, sources say both the bodies have not been collecting GST from the builders