Finance Ministry asked builders to must pass on lower GST to buyers.

Finance Ministry asked builders to must pass on lower GST to buyers.

RM | June 17, 2017 | Saturday

Delhi/NCR: Central government asked builders to pass on the benefit of lower tax under the GST system to buyers by reducing prices and installments, otherwise the action will be violative of the anti-profiteering clause.

"The builders are expected to pass on the benefit of lower tax burden under the Goods and Services Tax (GST) system to buyers of property by way of reduced prices/ installments. It is, therefore, advised to all builders/construction companies that for flats under construction, they should not ask customers to pay higher tax rate on installments to be received after GST imposition," a Finance Ministry statement said here.

"Despite this clarity, if any builder resorts to such practice, the same can be deemed to be profiteering under Section 171 of the GST law," the statement said.

The clarification came as the government said that the Central Board of Excise and Customs (CBEC) and states have received several complaints that in view of the works contract service tax rate under GST at 12 percent in respect of under-construction flats and complexes, people who have booked flats and made part payments are being asked to make the full payment before July 1 or face higher tax.

The construction of flats, complexes, and buildings will have a lower GST as compared with a plethora of central and state indirect taxes under the existing regime, it added. Under the GST, the full input credit will be available for offsetting the headline rate of 12 percent.

"The input taxes embedded in the flat will not form a part of the flat's cost. The input credits should take care of the headline rate of 12 percent and it is for this reason that refund of overflow of input tax credits to the builder has been disallowed," the statement said.

Central excise duty is payable on most construction materials at the rate of 12.5 percent. It is higher in case of cement.