Union Housing and Urban Poverty Alleviation (HUPA) minister M Venkaiah Naidu has written to Chief Ministers of all states asking them to rein in the practice of builders arm-twisting homebuyers into making full payment for their new apartments before July 1, 2017, or to bear a higher tax rate for payments later.
In the letter, Naidu has pointed out that the revenue department has said that as compared to the current tax regime of the Centre and states on construction of flats, complexes and buildings, the incidence of
GST at 12 per cent would be lower. The GST Act states that any reduction in the rate of tax on any goods or services or the benefit of input tax credit will be passed on to the recipient by way of a corresponding reduction in prices.
Naidu’s letter said that “input tax credit of these taxes, which were not currently allowed for payment of service tax, shall henceforth be available”. It added that customers are often oblivious to the fact that they are made to pay for the central excise duty, value-added tax (VAT) or entry tax paid on construction material, which are all factored in the final pricing of the flat. “We have got reports that many builders are playing truant and asking buyers to cough up the entire remaining payment for the house before July 31 by feed them wrong information,” said a ministry official.
The letter was prompted by a communication from the finance ministry to HUPA where the former brought the issue to Naidu’s notice.