There may be further GST (Goods and Services Tax) relief for the home buyers with the authority on Advance Ruling in West Bengal concluding that some basic services like location, car parking in apartments should be treated as “composite construction service”.
After the ruling, now builder’s have to charge 5% GST on services sum up with affordable homes and 8% on others. Many of the builder’s have been charging 18% GST on these services which government had already lower the rate on under-construction apartment buildings. The government has allowed one-third deduction on the value of land that results actual tax charge coming to 8% for non-affordable residential units category when the GST rate is 12%.
Taxability of ancillary charges recovered by builders like preferential location charges (PLC), parking charges, transfer fees, external development charges, internal development charges (IDC), document charges etc has been a matter of dispute even under the erstwhile service tax regime. With this ruling, it is likely that diverse practices adopted by builders on taxability of PLC and parking charges end, and such services henceforth are made liable to tax at the lower rate as applicable to construction services.” said Harpreet Singh, partner at consulting firm KPMG.
The real estate sector was in this confusing situation on taxability of preferential charges like right to use various facilities like parking and others, the essential reason being as to whether some of these qualified as under construction services on which the lower GST rate of 12% or 5% would be available or they would be taxed at 18%.”