Real estate players will have to take loss of credit of around 5-7%, say experts

The GST Law and Fitment Committee has proposed that the input tax credit (ITC) on input goods & input services lying unused as of March 31, 2019 shall be reversed by the real estate developers through GSTR 3B, sources told CNBC-TV18.

The government feels that the ITC benefit available to the real estate developers will lapse from April 1, 2019 any new invoice raised by builders will have to be charged at 1 percent for affordable housing without ITC and at 5 percent without ITC for other than affordable housing.

The 34th GST Council will meet on March 19 to finalise the transition norms for reduced rates on real estate.

To discuss this and more, CNBC-TV18 spoke with Gulam Zia, executive director at Knight Frank and MS Mani, partner-GST at Deloitte India.

According to Mani, "Ideally, it is good for both the customer and real estate companies. When we look at this lapsing of the credit, essentially it means in respect of houses which get sold after April 1, 2019 but which have been constructed prior to April 1, whatever is the tax credit balance that goes into some kind of suspense account."

According to Zia, "Looking at where the real estate market is currently, it would be very difficult for a builder to pass on the increase in costs to buyers, so whatever the loss of ITC will be an additional cost that the developer will have to take till such time that market is looking better."

"So, whatever this loss of credit of around 5-7 percent additional hit that the builders will have to take will be getting out of their margin and that is a concern", said Zia.