After Goods and Service Tax has been added to real estate unit prices mostly buyers are seen backing off last-minute deals as they are unwilling to shell out any additional expenses. Now the big question is if a developer or an infrastructure contractor is asking more cost for GST, should the customer pay the amount? Why not, ask developers.
Real estate contractors have filed petition against the central government of India and the GST Council to Bombay High Court saying they are incurring a huge loss due to GST as consumers are not ready to pay any excess charges what is exactly opposite of anti-profiteering.
In their petition the contractors and the developers have indicated the discrepancy in GST rates for contractors and subcontractors. For under-construction properties GST rate levied by the government is 18%, of which the developers are allowed to omit the land value, which apparently makes his effective payable tax at 12%, where a subcontractor has to pay full 18% GST. Subcontractors demanded an additional 6% GST reimbursement. Experts pointed out that post GST a series of real estate and almost all the infrastructure projects are either partly or fully constructed by the sub-contractors.
Now this additional tax burden can’t be passed on to the developer which means ultimately end-users will be facing an additional tax burden, said the contractors in a writ petition filed in the Bombay HC and contactors demand that government and the GST Council to fix this inconsistency and make an even tax rate for the contractors and the subcontractors or provide a mechanism for their loss compensation caused by the disparity in exiting tax rates under the unified tax regime. They also raised their voice saying there is an anti-profiteering mechanism for the end-users so that they can avail the tax benefits, then why government doesn’t introduce a similar kind of mechanism for the real estate stakeholders?
Abhishek A Rastogi, who is an advocate on record for sub contractors and partner at law firm Khaitan & Co. said, “There is a clear case of discrepancy, unintended perhaps, in the GST rate for contractors and subcontractors and this would lead to additional cost for the subcontractors of infrastructure and real estate projects when the prices are fixed.”
“There should be a mechanism, in line with anti-profiteering, where if loss is incurred due to GST rates it has be made good,” said Rastogi who is an advocate on record for subcontractors,”-added Rastogi. He hoped that the anti-profiteering authority set up by the government address a “reverse anti-profiteering” situation considering the incurring losses due to GST of the B2B suppliers. Moreover, cutting down GST rate on consumer contract between 6-8% won’t rack up any revenue loss to the treasury.
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