Real estate firms have reached out to the finance ministry for help after being notified by GST authorities that 27 prominent and mid-sized developers owe taxes for intra-group royalty payments used for brand name usage in special-purpose vehicles (SPVs) designed to carry out projects.
Additionally, notices were sent regarding the unpaid taxes on corporate guarantees that flagship companies offered to their subsidiaries, which are subject to an 18% GST. The real estate sector argued against the 18% GST on SPVs in their pleadings to the finance ministry, stating that it would significantly increase project costs and severely hurt their profits. These notices have prompted individual appeals to the finance ministry from the affected firms.
A senior official confirmed the ministry is reviewing the GST imposition concerns raised by these companies but did not disclose their identities. The sector argues the SPV approach has facilitated joint venture partnerships for various projects and is seeking clarification on several issues. The official indicated that the matter might be brought before the ministers’ group on real estate at the next GST council meeting.
The Directorate General of GST Intelligence has identified a tax obligation of roughly ₹3,500 crore, with ₹1,800 crore already collected. Officials maintain that SPVs using the flagship company’s brand and logo constitutes a taxable service at 18% GST. A DGGI official highlighted that recognizing this as a legitimate service led to uncovering a ₹3,500 crore tax evasion in the real estate industry.