The City and Industrial Development Corporation (CIDCO) has decided to not collect GST on the additional lease premium paid by lessee or developers for using additional floor space index (FSI) for plots allotted by the planning agency. Now such lessees can avail the benefits of the reverse charge mechanism.
As the Government of Maharashtra's Unified Development and Promotion Regulations 2020 (UDPCR 2020) policy applies to the entire CIDCO jurisdiction, including Navi Mumbai, for the approval of additional FSI for the plot by levying additional premium from the leaseholder. Accordingly, additional premium along with GST was levied for sanctioning additional FSI for plots allotted by CIDCO in Navi Mumbai.
But some promoter applicants had requested CIDCO not to impose GST on the additional premium.
CIDCO conducted discussions with GST expert advisors. According to the expert, CIDCO is not required to levy GST on the additional premium levied on the additional carpet area index from the promoter who wants to develop a residential construction project or any other construction project on the land concerned and sell it to buyers. Instead, it was suggested by the expert advisors that the tax may be paid by the concerned promoters under the reverse charge mechanism as per Notification 04/2019 and 05/2019 CGST rates.
Sanjay Mukherjee, vice chairman and managing director of CIDOC said, “CIDCO has always taken efforts to stimulate the real estate market that is facing unfavorable conditions due to the pandemic. In accordance with the provisions in the GST, CIDCO has decided to provide benefits to promoter developers so that they need not have to pay GST on the additional premium if they opt for reverse charge mechanism under GST law provision. This will reduce the financial burden on developers to a great extent.”
However, there are certain guidelines to avail the benefits. Applicants should request to confirm their eligibility to avail the reverse charge mechanism as per the above GST clauses. Applicants must confirm that they are the promoter under the RERA Act 2016. The applicant should submit an affidavit and promissory note on a non-judicial stamp paper of Rs. 500. As per CGST rate notification no. 04/2019 and 05/2019 they should confirm that they will fulfil their GST obligation under the reverse charge mechanism.
Meanwhile, CIDCO has appealed to more and more promoters to avail the GST exemption under the reverse charge mechanism by fulfilling the above requirements as soon as possible.
However, the developers body said that there are no monetary benefits of the decision. Haresh Chheda, president of Builders Association of Navi Mumbai said that developers or builders have to pay the GST. "Earlier, they were paying to CIDCO and now they will directly to the concerned tax department," said Chheda.