While GST on under-construction flats is a dampener on sales, some builders have found a way out.
MUMBAI: Prospective flat buyers are indulging in innovative ways to circumvent paying the 12% GST levied on under-construction flats. GST on such projects is one of the main reasons that have kept purchasers away, said builders.
Some builders have found a way out for the prospective buyers. They show the booking amount as a 'loan' given by the buyer to its subsidiary company and once the building is ready with the mandatory occupation certificate from the BMC, the builder returns the amount to the purchaser with interest. " Nil GST on completed projects offers loophole
While GST on under-construction flats is a dampener on sales, some builders have found a way out. They show the booking amount as a ‘loan’ given by the buyer to its subsidiary company and once the building is ready and occupation certificate (OC) obtained, the builder returns the amount to the purchaser with interest. “The client then pays back the entire money to the construction firm,” said a builder with projects in the eastern suburbs. This does the trick because GST is not levied on completed projects with OC whereas GST rate is 12% on under-construction projects, and buyers in the affordable housing segment (homes of up to 60 sqm carpet area) pay 8% GST.
