How GST real estate profiteering works

Here is my understanding of how profiteering works in real
estate sector and I would appreciate any addl inputs from NAA

Under the Goods and Services Tax (GST) regime, a 12% tax rate is charged on the sale of under-construction flats while full ITC can be availed by a builder for offsetting the headline rate of 12%.

The builder has to pass on the benefit available on account of the ITC by reducing the base price of the flat for the buyer.

As the ITC is availed by the builder on the materials utilised for construction, the overall tax liability should come down by 4-8% for the under construction properties. It, however, varies from state to state. In cities like Delhi and Mumbai, where the land prices are high, the builder should pass on an average 4-6% tax benefit to the consumer. In the states where the land cost is less, builders should pass on more benefit to consumers.

As per the anti-profiteering provisions under section 171 of the Central GST (CGST) Act, any reduction in the rate of tax on supply of goods or services or the benefit of ITC shall be passed on to the recipients by way of commensurate reduction in price. more  

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Every sector has lobbyist group who find loopholes in the Law & Legislation through which they can make profits by bypassing them without getting into trouble. As such they would surely pass on a percentage to the law makers and enforcers so that the long hand of law reaches them fast to save them when common affected people knock on the doors of justice. There could ofcourse be genuine builders who would not compromise their reputation for either commission or corruption. more  
In addition to the issue of the malpractices resorted to by most of the developer builders by not passing on the ITC benefit on building materials etc. to the home buyers contravening the anti-profiteering rules, I would request our esteemed Circle members to also throw some light on similar issues of denial of ITC benefits by work contractors who are engaged by Registered Co-operative Societies & private persons to build their own membership flats/individual homes on turnkey basis. In such cases the GST rate is higher at 18% on the work contract value as no transfer of land is involved. The problem is how can a society or individual know the quantum of ITC availed by the work contractors on the building materials, fixtures /fittings including lifts, sub-contracting etc. and claim corresponding cash back from the contractors? Since housing is a priority sector for the Govt., it should bring down the GST rate from the present high @ 18% to a reasonable level for these classes of assesses & also prescribe suitable ITC refund norms applicable for construction work contract sector as well. more  
NAA ? 


On Sunday, 16 December, 2018, 10:46:09 AM IST, Harsimran Kaur <connect@localcircles.info> wrote: more  
RERA and other authorities should make it compulsory for builders to submit an auditor certificate every three or six months certifying that benefits of refunds / ITC availed by the builders have been fully passed on the home buyers. more  
Let the GST enforcement squad act on such cases. more  
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