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Home Buyers May Advantage Due to Input Tax Credit under GST after 1st July
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New Delhi, 30th June 2017: The real estate sector is possibly going to get advantage from the availability of input tax credit under GST (Goods and Services Tax) in spite of falling under the slab of the high rate of 18%, in accordance with the rating agency ICRA. It will be naturally beneficial for the home buyers who have invested in a project based on the amount which will be due possibly from them to the constructor on 1st July.

According to Government’s proposal, 12% GST on the sale of under-construction units will start from 1st July 2017 onwards. In the case of the construction sector, GST will be an additional stamp duty rate charged by the states. Both the VAT (Value Added Tax) and Service Tax will include it. While there is a 6.5% increase under the new GST rule in terms of the tax payable by the home buyers, the builders have another option to pass the advantage of input tax credit to the flat purchasers.

According to Rohit Gera, MD, Gera Developments, and VP Credai, Pune Metro, the amount of GST a builder will be charging the buyers will depend on the quantum of consideration outstanding as on 1st July. Well, it can vary for various buyers in the similar project. Thereby, it can be considered that two buyers in the similar project with different quantum payable to the constructor and two buyers in two different projects with the similar quantum payable to the constructor will possibly not get a different input set off advantage.

Depicting that a flat’s construction cost worth Rs. 1 crore in a project is actually Rs 50 lakhs for which the builder has spent nearly Rs 40 lakhs by now, the constructor will need to pay GST on the rest Rs 10 lakhs after 1st July in order to get the input tax credit from the vendors. In the case of the builder, if the applicable GST is 18%, the builder may need to pay almost Rs. 1.8 lakh as GST to his vendor.

A buyer who may have spent Rs 90 lakhs and has nearly Rs 10 lakhs as unpaid debt after 1st July, may need to pay Rs 10 lakhs and Rs 1.2 lakhs as GST which cost to Rs 11.2 lakhs so that the constructor can technically pass on the complete input tax credit benefit of Rs 1.2 lakhs to the purchaser.

The second buyer who has an unpaid debt of Rs 90 lakhs as on 1st July, the due amount from him will be Rs 90 lakhs and 12% GST that is Rs. 10.8 lakhs. Hence, out of this Rs 10.8 lakhs, the builder will be capable of passing on an input tax credit of Rs 1.8 lakhs.

According to Gera, since the service tax has been included to GST, GST charged to the buyer will vary from buyer to buyer. A builder will be aware of the amount of savings because of the buyer only in the future as he has no clue about this amount has been paid by him to his vendors. Hence again it is based on whether the vendor’s turnover is lesser than Rs 20 lakhs or more than Rs 20 lakhs.

Gera adds that no transparent formula is found there whereby a buyer can ensure what advantage he can have. And this is where there is a chance of disputes the builders can pass on the advantage to the buyers but will pass it on as and when they can make sure the precise amount of the advantage only.

Nevertheless, GST is not applied to the ready properties and for this reason, the builders will either need to bear the tax burden as it can’t be passed on to the end buyer or the flats’ charges which are ready for occupying will increase to the maximum taxes. Additionally, it will cause a transformation in the quoted cost by the builder but the total price to the end buyer will remain highly unchanged, according to the builders.

Supriti Ganguly

Author: Supriti Ganguly

Supriti Ganguly is a Content Contributor at She is having more than three years of experience in working closely with B2B and B2C businesses providing blog writing, article writing, news writing, and copywriting services. Supriti is a professional writer with extensive knowledge on content marketing and adept in content strategizing for business collaterals. She is experienced in writing technical, promotional articles, and blogs that leave a lasting impression on readers.