Ready to move-in flats to cost more

The consumers will have to shell out more for the ready to move-in flats under the GST system as developers with large unsold inventories are planning to pass on the higher tax burden to home-buyers. However, the new flats will cost less, giving some breather to the developers of upcoming projects. Under GST, the effective tax on under-construction projects has gone up to 12 per cent, which is an increase of 6.5 per cent. The actual GST rate is 18 per cent on realty, but allows one-third of the tax to be deducted from the land value, from the total cost charged by the developer.

The GST gives an option of getting full input set-off credit, which is not applicable on ready-to-move-in flats and as a result, developers will have to bear the burden of higher tax or pass on to the end-consumers or increase the overall prices to match the new tax burden, say developers. "While developers might still get some benefits for projects that are in nascent stages, they will have to bear the tax burden for the ready-tomove-in projects since they are kept out of the GST ambit,"Hiranandani Group Chairman and Managing Director Surendra Hiranandani said. Gera Developments Managing Director Rohit Gera said under the GST regime, tax on under construction projects would be 12 per cent, an increase of 6.5 per cent for buyers.

"There is an option of getting full input set-off credit on all input side if GST is paid by them, but this is not applicable on ready-tomove-in properties," he said. As a result, developers will either have to bear the burden of the tax since it cannot be passed on to the end consumers or the rates of apartments that are ready-to-occupy will increase to the extent of the taxes," Gera said.

Vinod S Menon, CEO of Bengaluru-based mid-market developer Citrus Ventures, says "everybody talks about the positives that GST brings in. But the devil lies in the details and no one seems to have any clarity on that."