Real Estate Firms Seek Assistance From Finance Ministry Regarding GST Notifications

Real estate firms have reached out to the finance ministry for help following GST authorities sending notices to 27 major and medium-sized developers regarding intra-group royalty payments for using brand names in special purpose vehicles established to execute projects.

Authorities had also sent out notices for non-payment of tax on corporate guarantees provided by flagship companies to their subsidiaries, which attracts 18% GST.

In their representations to the finance ministry, realty players said most of the developers use SPV model for each project and imposition of 18% GST will inflate project cost and dent their margins substantially, people aware of the development said. The companies that have been served notices have approached the finance ministry individually, sources said.

The industry has also requested clarification on other issues, and the issue may be escalated to the group of ministers on real estate for further consideration.

The Directorate General of GST Intelligence has confirmed a tax liability of approximately ?3,500 crore and has managed to recover ?1,800 crore up to now.

According to officials, the utilization of the flagship company's brand name and logo by SPVs is considered a service and is subject to 18% GST. An official from the DGGI stated, "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.

By LNN (Liyaans News Network)