NEW DELHI: Builders will ought to refund GST paid by means of home consumers in case he cancels the flat booked inside the last economic and can be allowed to avail credit adjustment for such refunds, the tax department has said.

This explanation paperwork part of the FAQ launched by the Central Board of Indirect Taxes and Customs (CBIC) on real estate sector.

The FAQ has been issued to clean the air over the migration provision, which allows the real estate players to shift to five in step with cent GST price for residential devices and 1 according to cent for less costly housing with out the advantage of input tax credit (ITC) from April 1, 2019.


For the continued initiatives, developers were given the option to both maintain in 12 in line with cent Goods and Services Tax (GST) slab with ITC (8 in step with cent for affordable housing), or opt for 5 in keeping with cent GST price (1 according to cent for inexpensive housing) with out ITC.

The FAQ said developer may be capable of issue a ‘Credit Note’ to the consumer as according to provisions of Section 34 in case of trade in price or cancellation of booking.

“Developer shall be able to take adjustment of tax paid in recognize of the quantity of such Credit Note,” the FAQ stated.

Giving instance, it stated that a developer who paid GST of Rs 1.20 lakh at the fee of 12 per cent in appreciate of a gross amount of reserving of Rs 10 lakh earlier than April 1, 2019, shall be entitled to take adjustment of tax of Rs 1.20 lakh upon cancellation of the said reserving on or after April 1, 2019, in opposition to different liability of GST.

AMRG & Associates Partner Rajat Mohan stated “this rationalization although seems to have legal over-reach but would absolutely help neutralise the tax burden which clients may additionally face within the event of cancellation of vintage bookings”.
The FAQ similarly stated that when a actual property developer opts for the either antique GST taxation regime or the new one for ongoing tasks manually with the jurisdictional Commissioner, he will now not be accepted to modify it.

With regard to purchase of land from owner by using the developer commonly termed as Transfer of Development Right (TDR), the FAQ stated GST could not observe on agreements entered into on or after April 1, 2019.

However, for TDR agreements entered into prior to April 1, 2019, the developer will not be able to declare credit score for the GST already paid. TDRs were taxed at 18 in keeping with cent inside the GST regime.

“Tieing within the liability to pay tax on TDR’s primarily based on agreements entered earlier than April 1, 2019, regardless of the truth that initiatives were initiated underneath new tax regime without any tax credit, could result in a massive tax cost for already ill truth quarter,” Mohan said.

The FAQ further said that every one towers registered as distinctive projects beneath RERA can be handled as wonderful projects, for which the builder will have to preserve separate books of debts.

In case a real estate developer has amassed 12 per cent GST from home consumers beginning April 1, 2019, but later opted for 5 according to cent rate, the builder will need to refund the greater tax (7 according to cent) collected to the client.

The FAQ, however, did no longer actually spell out whether the 7 in line with cent tax refunded by way of the builder can be adjusted in opposition to his GST liability.

Real property companies have time until May 10 to talk to their respective jurisdictional officers whether or not they need to keep with the antique GST quotes with enter tax credit score, failing which they may be deemed to have migrated to new tax quotes.

PwC India Partner and Leader (Indirect Tax) Pratik Jain said “builders need to cautiously compare as to which scheme is greater green and really communicate to the customers therefore”.

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