Buyers have to pay higher taxes for flats on the remaining amount from July 1st. 12% GST must be paid on the payments due from July 1, instead of 4.5% service tax that paid on instalments till June 30.
For people who plan to buy after July 1 in a project that is complete or nearing completion, they will have to pay tax at the rate of 12% on the entire amount.
Builders claim that the 7.5% increase (12% – 4.5%) in tax post-GST is because they will not be able to claim any credit for taxes paid on inputs bought before July 1.
For projects that are nearing completion or complete, most buyers would have paid 90-to-95% of the price, whether they are on a construction-linked or a down payment plan.
In such cases, the burden of the higher tax will only be on the remaining 5 to 10% amount. After July 1, any invoice issued by the builder will attract 12% GST.
Many developers have already issued letters to buyers asking them to be ready to pay higher taxes on the remaining amount.
If a buyer has bought a flat for Rs 1 crore earlier this year and has paid Rs 20 lakh so far with 4.5% service tax.
On remaining Rs 80 lakh, 12% GST will have to pay, as construction progresses. The tax liability will jump from Rs 3.6 lakh (4.5% of Rs 80 lakh, under pre-GST) to Rs 9.6 lakh (12%).
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