If you are an owner of the house that is nearing completion, Goods and Services Tax (GST) might compel you to shed extra money for paying instalments.
Post the rollout of GST, flat owners would have to pay 12 per cent on payments due from July 1 onwards, instead of 4.5 per cent service tax that are to be paid in instalments till June 30.
Similarly, after July 1 every buyer who is investing in a project that is complete or nearing completion, will have to pay tax at the rate of 12 per cent on the entire amount.
For projects that are nearing completion or complete, most buyers would have already paid 90-to-95 per cent of the price, whether they are on a construction-linked or a down payment plan.
In such cases, the burden of higher tax will only be levied on the remaining 5 to 10 per cent amount. After July 1, any invoice issued by the builder will attract 12 per cent GST. Reportedly, many developers have already issued letters to buyers asking them to be ready to pay higher taxes on the remaining amount.
For instance, 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 per cent service tax.
On remaining Rs 80 lakh, 12 per cent GST will have to pay, as construction progresses. The tax liability will jump from Rs 3.6 lakh (4.5 per cent of Rs 80 lakh, under pre-GST) to Rs 9.6 lakh (12 per cent).
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