There may be further GST(goods and services tax) relief for home buyers with the Authority on Advance Ruling (AAR) in West Bengal concluding that services such as preferential location and facilities like car parking in apartments should be treated as “composite construction service” and attract the same levy as construction.
After the ruling, builders will now have to charge 5% GST on services bundled with affordable homes and 8% on others. Several builders, including some of the top players, were charging 18% GST on these services, while the government had lowered the rate for under construction apartments.
The government allows one-third abatement or rebate on the value of land, that results in the actual levy coming to 8% for non-affordable category residential units 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 a conundrum on the taxability of preferential charges, right to use car parking, etc; the essential reason being as to whether some of these qualified as under construction service on which the lower GST rate of 12% or 5% would be available or they would be taxed at 18%.