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The finance ministry has asked the housing and urban poverty alleviation (HUPA) ministry to sensitise states and the real estate regulator to hold consultations with developers to pass on benefits of GST to home buyers.
The tax department and states have received complaints that those who have booked flats and made part payment are being asked to make entire payment before July 1, 2017, or to face higher tax incidence for payment made thereafter.
Replying on this issue, Finance Minister Arun Jaitley said "this is wrong" and real estate developers should pass on the benefits of input tax credit to buyers or else they would have to face action under anti-profiteering rules.
Revenue Secretary Hasmukh Adhia has written to HUPA secretary and asked him to sensitise all the states as well as the regulator under the Real Estate (Regulation and Development) Act, 2016 (RERA).
"We have requested the HUPA secretary to hold meetings with real estate developers associations and make them understand," Adhia told reporters here.
Construction of flats, complex, buildings will attract a 12 per cent goods and services tax (GST) compared to about 11 per cent tax, which includes excise duty, VAT and service tax.
Jaitley said the real estate builder will enjoy the benefit of input credit, which will be deducted from tax liability.
"The lowered tax liability should lead to price reduction. The price reduction has to be be passed on to the customer," Jaitley said.
Asked if the anti-profiteering rules will apply if the home builder fails to pass on benefit, the minister said: "Anti-profiteering rules can apply. But we want to use the anti-profiteering rule as a deterrent. I hope we are not compelled to use it."
The GST Council, chaired by Jaitley and comprising state finance ministers, today cleared the anti-profiteering rules.
As per the rules, if the Directorate General of Safeguards (DGS) after investigation finds that the benefit of price reduction has not been passed to consumers, the anti- profiteering authority will ask the business to refund the same to the consumers.