GST on under-construction housing properties cut to 5%, affordable houses to 1%

IndianMascot

IndianMascot

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Union and state governments on Sunday decided to lower Goods and Services Tax (GST) on under construction housing properties to 5% from an effective 12% in a pro-consumer decision ahead of national polls due by April-May.

GST rate on affordable housing projects too has been lowered from an effective 8% to 1%. Under-construction properties priced upto Rs. 45 lakh will qualify as affordable housing projects for the purpose of GST relief in both metro cities as well as non-metro cities, finance minister Arun Jaitley told reporters.

"We wanted to give a boost to the real estate sector as well as give relief to the middle class, neo-middle class and the aspirational middle class class. This will come into effect 1 April 2019," said Jaitley.

Although the cap on price of the property is ₹45 lakh for both metro and non-metro projects to get the 1% tax rate, they have to meet different carpet area requirements. Only those with the carpet area of 60 square metre in metros and 90 square metre in non-metros falling under the Rs. 45 lakh cap will be eligible for the 1% rate, explained Jaitley.

In both the cases, builders will not be able to adjust the taxes paid on raw materials like cement and steel against the final tax liability on under-construction properties. This was not the case earlier. The composition scheme announced for properties, like those applicable to restaurants and traders, consists of a small flat tax rate without input tax credits.

A videoconference of the Council's meeting held last Wednesday was adjourned as several states suggested a face to face meeting on Sunday was needed to discuss the issue thoroughly.

Sunday's decision was broadly based on recommendations of a ministerial panel led by Gujarat deputy chief minister Nitin Patel which favoured lowering the GST rate on under-construction properties.

The idea is to boost the real estate sector which is struggling with record inventories. At present, the effective rate of GST on under-construction properties is 12% after allowing for the cost of land, which is out of the purview of GST. Properties where the construction has been completed attract stamp duty, not GST.


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IndianMascot

IndianMascot

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GST rate cut on under-construction properties: Explained in 10 points

Here are 10 things to know about the new GST rates for the real estate sector:

1) The GST on under-construction flats, which are not in the affordable housing segment, has been reduced to 5% without input tax credit (ITC) from 12% earlier with the ITC. The GST rate on affordable homes has been reduced to 1% without the ITC from earlier 8% with the ITC.

2) The rate cut is for under-construction property or ready-to-move-in flats where the completion certificate is not issued at the time of sale. Properties, for which construction has been completed, attract stamp duty, not the GST.

3) The GST Council has also redefined the affordable housing segment, which did not have any valuation threshold till now. Under-construction properties priced up to ₹45 lakh will now be treated as affordable housing projects and will attract 1% GST without the ITC.

4) Although the cap on the price of affordable houses is ₹45 lakh for both metro and non-metro projects, the carpet area requirements differ. Only those flats with the carpet area of 60 square metre in metros (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata) and 90 square metre in non-metros falling under the ₹45 lakh cap will be eligible for the 1% GST rate.

5) Under the new definition of affordable housing, you can buy a two-bedroom house (60 sq m) in a metro city and a three-bedroom house (90 sq m) in non-metros and pay only 1% GST.

6) The new GST rates in the real estate industry will be effective from 1 April.

7) According to data from Anarock property consultants, there are 5.88 lakh unsold under-construction houses in the biggest seven cities of India, of which 34% are priced below ₹40 lakh. “With affordable housing now defined within ₹45 lakh, more properties qualify for this category. The GST cut, coupled with this critical change in definition, will induce more sales in homes falling in this budget range – a win-win for both builder and buyers," said Anarock’s chairman Anuj Puri.

8) Knight Frank India’s chairman and managing director Shishir Baijal estimates that the reduction in the GST can potentially reduce buyers' payout by 6%-7% on the overall cost, depending on the category. The increase in sales will also bring down the unsold inventory which has been afflicting the real estate sector, he said.

9) The lowering of the GST rates would lead to a revival of demand for under-construction apartments, that had tapered down as buyers were preferring ready apartments which did not attract any GST, said M.S Mani, partner, Deloitte India.

10) Going by the new GST rates, builders will not be able to claim the ITC. “Having certain categories which are not eligible for input tax credit is an aberration of basic principles of a good GST, to leading to issues of traceability of transactions and making the transactions opaque," Mani said.


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IndianMascot

IndianMascot

Core Member
But i hate this. If taklu Jaitly would have announced this an year back, I would have saved a lot. Now I have already paid everything.

Hence I request all to defeat this dumb FM from wherever he is contesting elections
 
DashMajor

DashMajor

EntMnt Knight
Lots of pressure for Young guns they have to see BJP winning as well along with their own portfolios. Tat is why he is back just for name sake.
 
IndianMascot

IndianMascot

Core Member
Jaitly is not in limelight bro. He is in bad light since Modi Govt came to power.

He wasn't ill. He was made to fall ill so that the budget can be presented by some more adorable minister. Else people and market would have reacted in a different way if this budget was presented by Jaitly.
 
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