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    Flats, commercial buildings to cost less

    With several property buyers forced to make the entire payment before July 1 to avoid higher tax incident with the arrival of GST, the Revenue department has clarified that construction of flats, complexes, buildings, etc., will have a comparatively lower incidence of GST, when compared with a plethora of central and state indirect taxes under the existing tax regime.

    Flats, commercial buildings to cost less
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    Crowds thronged Sub Registrar?s office on Friday

    Chennai

    “Apart from these existing tax regimes, input tax credit of these taxes which is currently not allowed for payment of service tax will henceforth be available,” a release from the Housing and Urban Development department said. In the current tax regime, incidence of central excise duty, VAT, Entry Tax etc. on construction material is borne by builders which they pass on to the customers as part of the price charged from them. But, the buyer does not see them as it becomes a part of the cost of the flat. 

    “Under the GST, the current scenario will be changed. Full input credit will be available for offsetting the headline rate of 12% proposed under GST. As a result, input taxes embedded in the flat will not be a part of the cost of the flat,” the release said. As the input credits take care of the headline rate of 12%, the refund of overflow of input tax credits to the builder has been disallowed. “It is expected that the builders will pass on the benefits of the lower tax burden to buyers in form of reduced prices/instalments,” the release said.  

    Meanwhile, crowds swelled up at the Sub-Registrar’s offices across the city over the past few days as people are keen to complete the land registration, before the Goods and Services Tax hikes up the construction costs. The Perambur Sub-Registrar’s Office, which services five-10 persons a day had to deal with more than a hundred on June 29 and 30. A source said, “Due to the implementation of GST from July 1, there are a lot of people come to register their lands. There will usually be four or five people a day but over the last two days, there have been over a hundred persons coming to complete the land registration process.” 

    Ajit Chordia, President of CREDAI (Confederation of Real Estate Developers’ Associations of India), Tamil Nadu, said that the ambiguities with the scenario post the implementation of GST would have made people complete the registration within the current set up. 

    “Currently, the guideline values are used to register the land. The total stamp duty and registration charges are 11% on the land component. In addition to this, there is a 2% on building construction and 6% service tax on the building construction contract After GST, there are still ambiguities. The prices are likely to go up based on computation. One view emerging is that land and buildings have to be taken together for levy of GST at 18%. 

    With 1/3 abatement as deemed land value, hence 12% will be the liability, if out early there will be input credit of GST on the material input. But for expensive properties the overall GST liability is expected to go up. On new and affordable projects, there would be lesser impact and overall, marginal benefit may accrue to buyers. But for ongoing projects, computing the GST with benefit of material input will be a herculean task. The burden will be on the customer,” he said.

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