Builders getting booked - good job circle
More than 50 property developers, including some of India’s top builders, are being investigated for profiteering under the goods and services tax (GST) regime.
Basically, builders have been making undue profits by failing to pass on to buyers the benefit of input tax credit that was available to them. Before GST was introduced in July 2017, various taxes levied by central and state governments on under-construction property added up to 5.5-6.5%. Under GST, real estate was placed under the 12% tax slab. Many builders duly raised prices, even though they could now claim input tax credit against products and services on which they had already paid tax.
In the pre-GST era, there was no input tax credit facility on construction materials like cement and steel, which was there in the GST regime (till March-end). This called for a price cut, not a price increase. more
builder - politician nexus is very strong. In fact many of the politicians are themselves builders. RERA is toothless like most of the regulatory bodies. So the property buyers will keep getting duped as earlier. more
First of all, we need to understand, Government in its wisdom, has made GST work in different verticals work differently. In case of Real Estate, we need to look at what was first and then come to the current situation. Even in the current situation, there are two stages. The first stage when there was a huge GST charged on the real estate business and the second stage when the GST was slashed by GST council on 24 Feb 2019. If pre-24 Feb GST was good at reducing real estate prices, then why did the government slash GST rates and modified the structure on 24 Feb? To be honest, neither pre-24 Feb nor post 24-Feb taxing is conducive for common man!
Material name / Taxes (includes Excise) before GST / After GST for various commodities used in construction / %ge cost in construction.
1. Cement / 25% (Pre) / 28% (GST) / 15% (Note: special grade cements where charged up to 31%. They are not used in normal house construction).
2. TMT / 28% / 28% / 10%
3. Sand / 5% / 5% / 12%
4. Bricks / 5% / 28% / 15%
5. Tiles, Sanitarty ware, plywood, wood, others / 28% / 28% / 12 % of construction cost
6. Electrical goods, plumbing, etc. / 12% / 28% / 20%
(I have not included mining costs which are not subsumed in GST. That continues to be paid to the government).
We should understand whether the manufacturer pays or we pay, end result is, we the consumer, pays! We pay these rates even though the credit is taken by the builder and then what he charges back on us may not carry the same rate of tax. But he will pass on his cost to us!
Net result is that we end up paying more or less the same amount while the government tells us that there is a reduction in taxes. It is not true! Tax collection has only gone up and not come down, as per government reports! more