Naujar Bharucha, Mumbai
Buyers and builders of under-construction flats have foundnew ways toavoid the 12 per cent GST . Already, people were avoiding projects under construction due to delay in possession and this further deteriorated due to GST. Because of this some builders have created new avenues for prospective buyers.
A builder in Mumbai said that he shows the booking amount as a loan given to a subsidiary company and when the building certificate is received after the building is ready, the builder returns the entire amount with interest. The client now buys the flat by paying the same amount to the construction company.
This jugaad works because GST is not levied on projects acquired by OC, whereas under-construction projects have to pay GST at 12%. Affordable housing segment is taxed at the rate of 8%.
Property expert Pranay Vakil says, “Some developers take money from buyers to a different account / company and transfer it to the flat cell after getting the OC.” At the same time, he also cautions that there is a danger that the developer may turn away from his promise if the project is delayed.
Anuraj Puri, chairman of Enarock Property Consultants, said, “GST tax neutral is considered along with input tax credit benefit, but ambiguity over the amount and timeframe for getting benefits has increased the search for ways to avoid GST.”
Puri said, ‘Under other methods, home buyers deal with developers and cancel the deal after getting OC. Later, a new agreement is signed between the two parties. Big and well-known developers are avoiding doing so for fear of getting into legal trouble, but smaller players are adopting such methods to avoid GST and attract customers.
He says that many homebuyers have cheated while doing so. Puri said, “RERA is strict and there is a provision for punitive action also, so it is not happening on a very wide scale. The government has to seize such players in order to maintain purity in the market.
However, the developer, who is preparing the luxury tower project in central Mumbai, said his company did not know about such activities. He said, “Our under construction cell remains strong and customers have no problem in giving GST as they get the benefit of input credit.”
