Real Estate Firms seek Assistance from Finance Ministry Regarding GST Notifications

GST authorities have sent notices to Real Estate that 27 prominent and mid-sized developers owe taxes for intro-group royalty payments used for brand name usage in special-purpose vehicles (SPVs) established to implement projects, after that Real estate firms have reached out to finance ministry for help.

The authorities sent notices regarding the unpaid taxes on corporate guarantees provided by flagship companies to their subsidiaries, which attracts 18% GST.

In the presentations to finance ministry, real estate stated that most of the developers use SPV model for project and 18% GST imposition will inflate project cost and will adversely affect their margins. Therefore, companies that have been served notices have approached the finance ministry.

The Directorate General of GST Intelligence has confirmed a tax liability of around 3,500 crore and he said that they managed to recover 1,800 crore upto now.

'This falls within the legal definition of a service, which will incur an 18% tax. We have identified an evasion of Rs 3,500 crore from the real estate sector alone.' an official from DGGI stated same.