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In recent months, various real estate entities across India have remitted amounts exceeding a total of INR 1,500 crore as Goods and Services Tax (GST) to the government. This financial remittance is linked to intra-group transactions, specifically related to royalty payments extended for the utilisation of brand names, as per insights from an authoritative government source.
Notices were dispatched to the real estate entities who had defaulted on their GST obligations concerning the deployment of their parent entities' brand names. Tax authorities assert that using a brand, including its name and logo, by Special Purpose Vehicles (SPVs), incurs an 18% GST levy, considering it a provided service. This action reflects a strategic effort to broaden the taxation scope within the sector.
Among the entities that have dutifully settled their GST dues are Tata Realty and Infrastructure, Tata Housing, Jindal Realty, DLF, and Vatika Group. The Tata Group, in particular, has emerged as a frontrunner, contributing a GST payment exceeding INR 100 crore. On November 20, the Directorate General of GST Intelligence (DGGI) started issuing notices to numerous real estate entities, emphasising the mandatory GST payments for various transactions conducted among group entities or joint venture partners.
Experts assert that the well-established and acknowledged "principle of stewardship" within the taxation domain underscores the undertaking of specific activities by holding companies for their individual benefit. This includes the utilisation of logos and brands by Special Purpose Vehicles (SPVs), a practice evidently aligned with the overarching interests of the flagship company.
It is noteworthy that leading real estate enterprises routinely engage in intra-group and intra-joint venture transactions, integral components of their operational strategies encompassing elements such as cash management and joint venture arrangements. Tax experts assert that the prevailing GST law subjects’ transactions between affiliated entities to taxation, even when conducted without any monetary consideration.
In conclusion, the real estate sector in India grapples with heightened GST scrutiny, particularly concerning intra-group transactions and brand name royalties. The ongoing developments underscore the real estate sector's evolving tax landscape and the imperative for entities to navigate these complexities to ensure compliance and financial prudence.
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