UP RERA directs builders to refund excess GST collected from homebuyers, warns against such levy

The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has directed promoters of all registered real estate projects to refund any excess Goods and Services Tax (GST) collected from homebuyers over and above the applicable rates.

In a circular issued to all registered promoters and real estate agents, the regulator said it had come to its notice that in certain cases, developers had collected GST from allottees at rates higher than those prescribed under the applicable notifications.

UP RERA said promoters had already been informed of the applicable GST rates through a circular issued on January 8, 2025, based on Central GST rate notifications issued in 2017 and 2019.

"GST in all projects registered with UP RERA should be collected only at the rates notified by the Central government," it said.

The authority said eligible homebuyers who were charged GST in excess of the prescribed rates would be able to claim refunds through the GST department's online mechanism.

UP RERA said that where GST had been collected at rates higher than those applicable for real estate projects, the excess amount received from the concerned allottee must be refunded in accordance with the procedure laid down in the CBIC and state tax circulars.

The regulator said the directions were intended to ensure that homebuyers were not burdened with tax beyond the legally prescribed rates and that promoters complied with the GST framework applicable to the real estate sector.

The circular has been addressed to all promoters of projects registered with UP RERA as well as all registered real estate agents in the state.

According to the procedure, if a homebuyer has paid GST while purchasing a flat or availing construction services but the project is cancelled, the agreement terminated or the allotment revoked after the statutory time limit for issuance of a credit note by the promoter has expired, the allottee can directly seek a refund from the GST department.

For this, an unregistered allottee will have to obtain temporary registration on the GST portal using a Permanent Account Number (PAN) and submit an application in "Form GST RFD-01" under the category "Refund for Unregistered Person", along with proof of tax payment, supporting documents and a certificate issued by the promoter.

The refund will be processed after verification by the competent authority under GST provisions.

UP RERA said that where the statutory period for issuing a credit note is still available, "the promoter himself shall issue the credit note or refund the entire amount, including GST, to the allottee." Only where the statutory period has expired would the allottee be required to approach the GST department directly.

The authority said refund claims must be filed within two years from the date of cancellation or termination of the agreement and clarified that claims involving GST below ₹1,000 would not be entertained.

"Wherever excess GST has been collected from an allottee, necessary action shall be taken to ensure refund of the excess amount in accordance with applicable legal provisions and the guidelines issued by the State Tax Department," it said.