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Don't force flat buyers to pay entire amount before July 1: Tax dept

Or else, it would be taken as profiteering

BS Reporter  |  New Delhi 

Don't force flat buyers to pay entire amount before July 1: Tax dept

The indirect tax department has warned builders against asking flat buyers to face higher tax rates if they don't pay the entire amount of houses before July one due to the proposed goods and services tax (GST).

The Central Board of Excise and Customs (CBEC) said if any builder resorts to such practice, the same can be deemed to be profiteering under the of law. The Council is yet to frame rules on anti-profiteering and this issue could be taken at the meeting on Sunday.

The Board said states have received several complaints that in view of the works contract service tax rate under at 12% in respect of under construction flats, complex etc, the people who have booked flats and made part payment are being asked to make entire payment before 1st July 2017 or to face higher tax incidence for payment made after 1st July 2017. 

"This is against the law," it said.

It clarified that construction of flats, complex, buildings will have a lower incidence of as compared to a plethora of central and state indirect taxes suffered by them under the existing regime.

For instance, the central excise duty is payable on most construction material at 12.5%. It is higher in case of cement. In addition, is also payable on construction material at 12.5% to 14.5% in most of the states.

In addition, construction material also presently suffer entry tax levied by the states.

of the above taxes is not currently allowed for payment of service tax.

Credit of these taxes is also not available for payment of on construction of flats etc. under composition scheme. Thus, there is cascading of input taxes on constructed flats, it said.

Similarly, the current headline rate of service tax on construction of flats, residences, offices etc. is 4.5 per cent.

Over and above this, at 1% under composition scheme is also charged.

The buyer only looks at the headline rate of 5.5%. In other cities, states, where is levied under the composition scheme at 2% or above, the headline rate visible to the customer is above 6.5%.

What the customer does not see is the embedded taxes on account of cascading and sticking of input taxes in the cost of the flat, explained. 

First Published: Sat, June 17 2017. 01:28 IST