Homebuyers stand to gain from GST input credit: Experts

The recent order of the Maharashtra Real Estate Regulatory Authority (MahaRERA) asking developers to pass on the GST input credit to homebuyers will benefit them, analysts say.

Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs.

Currently the GST on home sales is 12 per cent, and the GST a builder can apply on sale of property with input credit will not surpass 6-8 per cent. As such, homebuyers stand to gain. Builders say this means a form of discount for homebuyers.

Explaining how it works, chartered accountant Ramesh Prabhu, chairman of Maharashtra Societies' Welfare Association, said, "If a developer is selling a flat for Rs 300, the GST is 12 per cent, so he can charge Rs 36 as tax. However, he has already bought construction material worth Rs 100 on which he has paid Rs 28 as tax — given the 28 per cent tax on cement and steel. 

Now the difference in the two taxes is Rs 8. Only this Rs 8 should be passed on to the homebuyer as tax, not the whole, as the developer will be getting an input credit benefit."

Hailing the order, Rohit Poddar, MD, Poddar Housing, said, "This is in the interest of buyers of low-cost housing."