New Delhi: The Goods and Services Tax (GST) Council has given builders 10 more days to choose between old and new tax rates for properties that were under construction as on 31 March.
When the Council reduced tax rates on under-construction properties in March, builders were given time till 10 May to exercise their right to chose between old and new rates. They now have time till 20 May to make that choice, according to a notification issued on Friday by the Central Board of Indirect Taxes and Customs (CBIC).
The CBIC notifies the Council's decisions on behalf of the Union government, while respective state governments give effect to Council decisions at the state level.
According to the Council's decision in March, builders can opt for either the earlier 12% tax rate for homes that were under construction as on 31 March and pass on the benefits of input tax credit to customers, or choose the new GST rate of 5% that came into force from 1 April. If the new tax rate is chosen, builders cannot claim input tax credit. In case of under-construction affordable homes, builders can choose between the earlier rate of 8% and the new rate of 1%. However, these options are limited only to properties that were under construction as on the specified date and all new projects will be taxed according to the new rates from 1 April. The flexibility to chose between the two tax rates was given to help builders clear their inventory of under-construction housing units.
The extra time offers a relief for builders, according to experts. "Many real estate players were still evaluating on whether the option of lower rate without input tax credit would be more beneficial vis-a-vis the earlier higher rate with input tax credits for their businesses. This deferral would give some additional time to the industry to evaluate the option to be chosen," said Abhishek Jain, tax partner, EY.