Developers failing to transfer the benefits of GST reduction to homebuyers may end up compensating them with penalty in case the homebuyer withdraws from the project.
In a recent order that acts as deterrent for developers, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) directed a promoter to refund the booking amount with fine, after the latter refused to reduce the GST rate from 12% to 5%.
The case relates to a complaint filed by Rajesh over booking a villa developed by Alliance Villa Pvt. Ltd at Thaiyur on Old Mahabalipuram Road (OMR) on the outskirts of the city.
The homebuyer entered an agreement with the developer for land and construction of a row villa in a project named ‘Alliance Humming Gardens’ by paying Rs 4.18 lakh of the total villa price estimated as Rs 55.67 lakh. While the agreement was entered with a GST rate of 12% at the time, the Centre revised the GST rate from 12% to 5%, two months later.
The complainant submitted to the realty regulator that the developer insisted he pay GST at old rates against the government notification, committing a breach of trust. Following this, the homebuyer withdrew from the project.
As the developer did not refund the amount paid for booking the villa, the homebuyer filed a complaint with the TNRERA.
G Saravanan, adjudicating officer of TNRERA, said that for the ongoing projects, the promoter has an option to pay GST at old rates (12%), avail permissible input tax credit and pass on the benefit of the availed credit to homebuyers. When the homebuyer questioned the developer, the latter stated that the 12% GST was compulsory, the order added.
As per Section 19(1) of the RERA Act, the allotee has a right to all information regarding the villa intended to be purchased by him.
Taking all this into consideration, the adjudicating officer said the complainant was entitled for refund of entire amount paid with an interest rate of 10.15%, besides Rs 25,000 and Rs 15,000 as compensation and for legal expenses.
