T'gana: Home buyers feel GST pinch, ready-to-move-in flats to cost more

Hyderabad: Builders have started passing on higher GST to buyers of ready-to-move-in flats. The state government used to collect 5.75 per cent VAT on the real estate sector while the GST which came into effect on July 1 ramped it up to 18 per cent.

Builders said the effective tax on realty had gone up to 12 per cent under the GST regime after deducting one-third of the tax from the land value as per the new provisions. 

Builders say GST benefits can be passed on to buyers who purchase flats in new projects but not for those buying under-construction projects. 

The 6.25 per cent tax increase in GST compared with VAT is being passed on to buyers in under-construction projects, forcing them to shell out at least Rs 2 lakh more for a flat worth '30 lakh.

Buyers who were expecting decrease in property prices with GST are shocked to find builders asking them to pay more. Even those who are yet to get possession of their flats are being asked to pay the GST.

“I purchased a flat worth '30 lakh along the Warangal highway near Uppal in January. The agreement was made in April. It is nearing completion and the builder had promised to hand over the flat by July-end. Suddenly, the builder has begun asking me to pay an additional Rs 1.50 lakh citing hike in rates under GST. When I inquired with my friends and other builders, they too said property prices for under construction projects will increase,” said Mr B. Suresh Babu, a buyer.

Some buyers who purchased flats worth Rs 32 lakh to Rs 35 lakh are asked to pay an additional Rs 1.8 lakh to Rs 2 lakh over the earlier agreement reached with builders.

Credai Hyderabad president S. Ram Reddy said, “Builders are not willing to bear the additional tax burden on account of GST for under construction projects. For new projects, builders are ready to pass on whatever benefits given under GST.”

He said the tax on real estate in the Telugu states was 5.75 per cent, which included 1.25 per cent VAT and 4.5 per cent sales tax. This is likely to increase to 12 per cent in GST.

“We need to wait for at least one more month to assess the exact impact of GST. Though the cost of raw materials used in construction sector is expected to come down with GST, the burden on account of service tax would increase,” Mr Reddy said.

He said Credai welcomed GST as it would replace multiple taxes besides bringing down tax rates on realty sector in all other states barring TS, AP and Maharashtra, which had the lowest tax rates previously.

Unpleasant revelation

 Builders said the effective tax on realty had gone up to 12 per cent under the GST regime even after deducting one-third of the tax from the land value as per the new provisions.

The 6.25 per cent tax increase in GST compared with VAT is being passed on to buyers in under-construction projects, forcing them to shell out at least Rs 2 lakh more for a flat worth Rs 30 lakh.

 Even those who are yet to get possession of their flats are being asked to pay the GST.

Some buyers who purchased flats worth Rs 32 lakh to Rs 35 lakh are asked to pay an additional Rs 1.8 lakh to Rs 2 lakh over the earlier agreement reached with builders.