Commercial real estate developers grapple with GST credit restrictions amidst supreme court deliberations

In a recent development, commercial real estate developers who lease their properties are facing challenges due to notices regarding blocked credit eligibility under sections 17(5) C and 17(5) D. This comes even as the matter is under deliberation at the Supreme Court, according to key figures within the real estate sector.

Developers who construct commercial buildings and sell them prior to obtaining an occupancy certificate can potentially claim credit, but only if they pay the output GST on the sale. However, this Input Tax Credit (ITC) is not available for offset if the building is used for leasing purposes.

A representation by CII reveals that construction costs usually make up 32% to 38% of the total project expenditure. With an 18% GST rate applicable to such services, the industry faces substantial costs due to the specific ITC restriction. The industry experts have pointed out an inconsistency in the tax treatment for property sales versus leasing. While both are methods to derive value from properties, their tax treatments differ, which contradicts the principles of equality. Builders argue that claiming credit is their inherent right, and any refusal disrupts the tax chain, contradicting the essence of the GST.

In conclusion, the ongoing debate surrounding the GST regime for the leasing sector has highlighted the need for a more comprehensive and equitable approach. The industry awaits the Supreme Court's decision, hoping for a resolution that supports the growth and sustainability of the commercial real estate sector in India.

Next (With 30% property tax revenue sourced, Gurugram aims for Rs 500 crore)

Commercial real estate developers grapple with GST credit restrictions amidst supreme court deliberations

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