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It is illegal for builders to ask buyers of unfinished realty projects including flats to make full advance payment to avoid paying higher taxes after GST kicks in, Union housing minister M Venkaiah Naidu has said. He has asked all CMs and builders' associations to ensure developers don't charge higher taxes from home buyers after the goods and services taxes comes into effect from July 1. The minister has also said that since the GST regime will bring down the overall tax for real estate projects in comparison to the present taxes, the builders must pass on the benefit to consumers.

This comes barely days after the finance ministry warned builders of stringent action if they are found asking buyers to make the entire payment for any housing unit before the GST roll out.

It said that if any builder resorts to such practices, it can be deemed to be profiteering under the GST law.

In fact, Naidu has also referred to a communication from the revenue department. The department has mentioned that various representations and complaints had been received by states and the Central Board on Excise and Customs highlighting the builders ploy to get the entire money even before handing over flats.

Referring to the revenue department's communication, Naidu said the full input credit would be available for offsetting the headline rate of 12% proposed under GST.
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