Input tax credit (ITC)

Input tax credit lets a business reduce its GST liability by the GST it paid on purchases. Under the residential real estate scheme from 1 April 2019, the concessional 1% and 5% rates are available only without ITC.

The same notification requires promoters to buy at least 80% of inputs and input services (by value, excluding some items) from registered suppliers. Any shortfall attracts tax under reverse charge, generally at 18%. Procurement and accounts teams need to track this through the year.

Buyers sometimes ask why GST is not lower on a project with high construction costs. The honest answer is that the rate is fixed by law and ITC is not passed through.