It has been confirmed that the Real estate firms only get a time up to the 10th of May this year for the communication with the jurisdiction officers whom are currently in the charge of them. The communication is mainly for the confirmation of the wills of the firms whether they want to go on with the present GST rates, or the rates that are going to be implied soon.
A lot of things have to be kept in mind while agreeing to the GST rate. These include the tax credit used for input and the interest rates being used. If they fail to produce as demanded, they will be left with no other option than to choose the new modified GST rates.
New GST Rates
There has been an option provided by the GST council to the Real estate firms for opting either of the old rates of taxes that was 12 percent for residential properties and 8 percent of affordable housing properties along with the ITC benefits or Input Tax Credit Benefits, or the new GST rates that measure for 5 percent tax rate for residential properties and a meager 1 percent for the affordable housing properties. The latter one does not include the added benefits of to be able to adjust the credits imposed on the inputs that are being used while the construction is going on for the property. CBIC or the Central Board of Indirect Taxes and Customs has recently published the notification that states that the Real estate firms will have to choose between the two options of the tax rates before 10th May, 2019.
If it happens that the Real estate firms do not choose any of the options, or fail to do so in the stipulated time period, the low tax rate combination of 5 percent and 1 percent will be the only option that they will be left with. This will take effect from the 1st of April, 2019. The Real estate firms will also be excluded with the advantages that the inputs could do to get the tax credits.
The CBIC has also issued another notification, where they have stated that the Real estate firms which have chosen the option to get the new GST rates need to start preparing their accounts book which should be in compliance with the ITC. In case of the accumulation of any over used credit that remains, it needs to be repaid to the government in a span of 24 installments.
The builders who are choosing the lower tax rates effecting from 1st April, 2019 need to calculate the tax credit which is eligible for them again, because of the start of the new GST rate. This division is solely based on the distribution and combination of the residential property tax rate with the affordable housing property tax rate.
For the projects that are nearing the finishing of the construction, the possibility of the accumulation of credit may go beyond the permitted level. In this case, they also need to pay back the excess amount to the government. This in turn, may induce a risk in the Real estate marketing sector, and the possibility of poor cash flow is on the cards.
The CBIC has also taken further steps to ensure that this additional credit can be recovered as much as possible. For doing so, they have stated that the Real estate builders need to maintain a strict account of their inward supplies that they need to maintain their building projects, from both registered and unregistered sources and suppliers. This will make the Real estate taxpayers a bit relieved as their tax will be paid according to the accounts and records they will be maintain and creating.