Over 50 property developers, including some of India’s top builders, are facing probe for profiteering under the Goods and Services Tax (GST) regime, said sources.
Reportedly, the investigation by the Directorate General of Anti-Profiteering (DGAP) is planning to investigate the matter by finding out whether the builders have made undue profits by not passing on to buyers the benefit of input tax credit that was available to them.
Prior to the introduction of GST in July 2017, several taxes were levied by central and state governments on under-construction property added up to 5.5-6.5 percent
As per the GST, real estate was categorised under the 12 percent tax slab. Despite having a provision to claim input tax credit against products and services on that are paid by the builders as tax, many builders duly raised prices.
21 months after the introduction of GST, the tax credit facility was withdrawn on 1 April for new projects, as federal indirect tax body GST Council felt that the consumers were not getting any benefits out of it.
Before GST, excise duty was levied at the rate of 12.5 percent on most construction materials by the central government, while state governments used to levy 12.5-14.5 percent value-added tax (VAT) on these materials.
The amount paid towards the above-mentioned charges, however, was not available as credit for adjusting against the 4.5 percent service tax and the 1-2 percent VAT (depending on the state) levied on the under-construction flat sold to the customer.
Sources suggest that DGAP has so far investigated about 125 cases and found that 60 percent of them had involved in profiteering.