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Small Wins

Rashmi Pratap     April 1, 2019

The government has given developers the option to either levy 12 per cent GST on under-construction houses and take input tax credit (ITC) or go for 5 percent GST without taking ITC. While it may seem that it has done builders a favour by giving them a choice, it is ultimately customers who will decide what GST developers can charge.

That is because property prices have been stagnant for three years. With the massive unsold inventory that developers are stuck with, real estate is now a buyers' market. Developers will have to charge what customers are willing to pay, and it is the lower rate of 5 per cent.

This will also benefit developers as sales and customer advances will increase due to lower taxes, resulting in less dependence on debt. With the GST ball being in the customers' court now, a 5 per cent tax without ITC is what most developers will end up levying.

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