GST applicable on refund of cancelled under construction flat?

GST applicable on refund of cancelled under construction flat?

We are currently in the process of cancelling a 2bhk unit purchased in 2018 sept. The clause for cancellation in the sale agreement states that
"Developer shall refund to the customers (subject to deduction of booking amount equal to the 10%of the total said unit value and any agreed liquidated damages and any other amount which may be payable to Developer), the installments of sale consideration of the apartment which may till then have been paid by the customers to the developer."

We have made about 40% of total unit value payment till date which has been inclusive of GST.

Q1. The developers in their advice for cancellation and refund amount have charged 18%GST on the 10% deduction of unit value. Is this valid?

Q2. The GST that the developer has already paid in my 40% payment, can I seek any receipts for the same from the developer? Is it possible to get a refund?

Asked 5 years ago in GST

Dear Sir,

Hope you are doing well !!

Yes, it is vaild.

You need to take proof from builder that he paid the GST to the government which you had paid to builder.

Once you cancel the booking, the builder is liable to refund your booking amount after deducting agreed penalty charges

However since the builder would have already deposited the GST amount with the government, the builder is not liable to obtain refund of that GST

For the refund you will have to make an application to the GST Council seeking refund as your booking is cancelled.

We have handled such cases before.

We may assist you in entire procedure.

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed

CA, Mumbai

5189 Answers

302 Consultations

Talk to Payal Chhajed

1. In my opinion, developer will have to charge GST on 10% amount.

2. Builder should repay this amount along with GST. You may refer this article.

https://taxguru.in/goods-and-service-tax/applicability-gst-cancellation-flats.html

Ruchi Goel Anchal

CA, Gurgaon

525 Answers

16 Consultations

Talk to Ruchi Goel Anchal

Dear sIr,

If you want to cancel the booking and thus, surrender your rights over the under-construction property, the builder may agree to refund the booking amount and instalments paid.

Although the developer may have collected GST from you, he may or may not agree to refund this amount, as he may have already deposited the amount to the credit of the government. The builder will not be entitled to claim any refund with respect to the GST, as he has already rendered services to you.

However as per the FAQ relesaed by the Central Board of Indirect Taxes and Customs (CBIC) on real estate sector, Builders will have to refund GST paid by home buyers in case he cancels the flat booked in the last fiscal and will be allowed to avail credit adjustment for such refunds.

Thanks & Regards

Shiv Kumar Agarwal