GST Council Cuts Rate To 5% On Under-construction Residential Properties

Published on: Feb 25, 2019 @ 02:44

In  a  major  relief  to  home buyers  and  the  real  estate  sector, the  Goods  and  Services  Tax  (GST)  Council  has approved  the  proposal  for  lowering  the  GST  rate  on  under-construction  residential  properties  in  both  the  Affordable  and  Non-affordable  housing  segments. In  the  33rd  GST  Council  meeting  on  Sunday, Union Finance Minister  Arun  Jaitley  and  other  Council  members  agreed  to  slash  the  rate  on  under-construction  housing  properties  to  5  per cent  from  the  current  12  per cent. The  Council  has  also  reduced  GST  rate  for  affordable housing  to  1  per cent  from  the  existing  8  per cent.

The  new  revised  GST  rates  will  come  into  effect  from  April 1, 2019. Earlier  in  the  month  of  January, the  GST Council  notified  formation  of  a  ministerial  panel  to  study problems in  the  real  estate  sector  and  suggest remedial  measures. The  panel  is  headed  by  Gujarat  Deputy  Chief Minister  Nitin  Patel. Now, the  law  and fitment  committee  will  draft  the  guidelines  by  March  10  which  will  be  taken  up  in  a  subsequent  GST  Council  meeting.

Currently, the  GST  rate  is  levied  at  12  per cent  for  under-construction  housing  properties  or  ready-to-move-in flats  where  completion  certificate  has  not  been  issued  at  the  time  of  sale. However, GST  is  not  levied  on those  housing  properties  for  which  completion  certificate  has  been  issued  at  the  time  of  sale.

However, builders  will  not  be  able  to  claim  input  tax  credit  (ITC)  under  the new  GST  rates. Therefore,  this will  make  the  issue  of  developers  not  passing  on  the  benefits  of  ITC  to  home buyers  as  irrelevant. Moreover, the  Ministry  of  Finance  said  in  a  statement  that  unutilized  ITC, which  used  to  be  added  to  the  end  cost  of the  project, will  now  be  removed  to  make  prices  more  reasonable.

The  GST  Council  in  its  meeting  today  has  also  expanded  the  definition  of  the  affordable  housing  segment. Now,  this  segment  in  metro  cities  will  include  those  residential  properties  measuring  a  carpet  area  up to  60  sq  meters  and  costing  up  to  Rs 45 lakh. However, in  the  case  of  non-metro  cities, residential  properties  with  a carpet  area  of  90  sq  meters  and  cost  up  to Rs  45 lakh  will  be  considered  under  the  affordable  housing segment.

The  GST  Council  also  decided  that  intermediate  tax  on  development  rights, such  as  TDR, JDA, lease (premium), FSI  shall  be  exempted  only  for  such  housing  properties  on  which  GST  is  payable. This  exemption help  address  the  problem  of  cash  flow  faced  by  the  real  estate  sector.

Finance  Minister  Arun  Jaitley  said  in  a  statement  that  the  move  would  be  a  major  step  in  our  efforts  to  give  ‘boom’  to  the real  estate  sector, and  make  housing  affordable  to  the  middle  class,  neo-middle  class  and aspirational  class. These  changes  should  also  help  make  tax  structure  and  tax  compliance  easier  for  builders.

Next Post

New GST Rates And Rules - Its Implications On Housing Market

Fri Mar 15 , 2019
Published on Mar 15, 2019 5:10 am In the midst of the code of conduct of general elections, the Election Commission has given its approval for holding the GST Council meeting on March 19. The nod from the Election Commission (EC) was required as the model code of conduct has […]