GST on under-construction flats slashed to 5%, affordable housing to 1% Below 45 Lakh

GST On Affordable Housing At 1% Residential property priced at Rs 45 lakh or below will be considered ‘affordable’ and taxed at 1 percent, from 8 percent earlier. Under-construction properties priced over Rs 45 lakh will invite 5 percent GST, versus the previous rate of 12 percent.

The Goods and Services Tax Council has approved lowering the tax rate on under-construction properties to 5 percent, from 12 percent earlier. Affordable housing projects will attract 1 percent tax. The definition of what constitutes affordable housing has been changed. However, developers won’t be allowed to claim input tax credit.


A 5 percent GST on under-construction properties will make a “world of difference” for the properties whose construction was in progress, says Niranjan Hiranandani, the Managing Director of Hiranandani Group. He said that the current change in rates brings clarity on input tax credit and other issues at the time of occupation. Chetan Shah, the Chairman and Managing Director of Marathon NextGen Realty said that while the rate cut is a good move what happens from here till Apr. 1 2019 is the issue. “.. there will be people who will unnecessarily wait till March 31. they should have made this (rate cut) applicable immediately from tomorrow itself. Could Lead To Increased Costs Hiranandani expected a cut in the GST on cement. “That needed to happen since cement is a big factor in infrastructure and housing. Costs needs to be controlled, in terms of cement and other elements that go into making a product so that the input credit, which gets lost, is actually reduced so that “true costs can be passed on by the developers,” Shah said. Although a good news for home buyers, developers will be burdened with GST payments to vendors, suppliers, agencies and contractors, says Parth Mehta, Managing Director, Paradigm Realty. this will land up increasing cost further amidst the already shrinking margin in business due to dynamic policies implemented by government.” Subtracting the ITC may not be a great move for the progress of Prime Minister Narendra Modi’s ‘Housing for all by 2022’, he said.

Finance Minister Arun Jaitley said that the GST council agreed to lower GST for affordable housing to 1 percent. This move will give a “boom” to the real estate sector, and make housing affordable for middle-class, neo-middle class and aspirational class.

‘Affordable housing’ in Bengaluru, Chennai, Delhi NCR, Hyderabad,Kolkata, Mumbai MMR region will have a carpet area up to 60 sq metres and will be priced up to Rs 45 lakh. In non-metro cities, criteria for affordable housing will be defined based on carpet area of up to 90 sq. metres and cost up to Rs 45 lakhs, he added. “We expanded the definition of affordable housing so that aspiring people can buy better houses.” This decision will give good boost to apartments under construction, lead to credit flow for real estate sector, he said.

On other issues in real estate like the transfer of development rights, joint development rights, lease premiums, sale or transfer of Floor Space Index, Jaitley said there was a suggestion to exempt this from GST to give a boost to the sector. On that, the GST Council wants rules and guidelines for transition to be prepared. The fitment and law committee will draft those guidelines by March 10. Then the recommendations will be put in front of a subsequent GST Council meeting, Jaitley added.


gst council 1%
gst council 1%

GST on under-construction flats slashed to 5%, affordable housing to 1% Below 45 Lakh

NEW DELHI: To boost demand in the real estate sector, the GST Council on Sunday slashed tax rates for under-construction flats to 5 per cent and affordable homes to 1 per cent, effective April 1.

Currently, the goods and services tax (GST) is levied at 12 per cent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale.

For affordable housing units, the existing tax rate is 8 per cent.

With regard to lotteries, the GST Council, however, deferred a decision with Jaitley saying that the Group of Ministers (GoM) will meet again to discuss the proposal.

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Currently, state-run lotteries attract 12 per cent GST, while state-authorised ones carry 28 per cent tax.

Briefing reporters after the 33rd meeting of the GST Council, Jaitley said the consumers felt that the benefits of ITC were not being passed on to them by the builders, and hence a GoM was set up to suggest changes in taxation on real estate.

The union finance minister said that currently GST is levied at 12 per cent on normal residential houses and 8 per cent on affordable homes after considering one-third abatement on account of land cost.

“The council has decided that after removal of ITC, the rates will be 5 per cent for normal housing properties and 1 per cent for affordable housing,” he said.

To ensure that the real estate sector does not go back to cash driven on account of removal of ITC, Jaitley said the builders will have to purchase a “very high percentage” (which will be decided by a committee) of their inputs from GST registered dealers.

The reduction in rates will give a boost to housing for all and fulfil aspirations of the neo-middle class, he said.

The council also expanded the definition of affordable housing for the purpose of availing GST benefits to those flats costing up to Rs 45 lakh and measuring 60 sq metre carpet area in metros (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata) and 90 sq metre carpet area in non-metros.

“We have adopted twin definition of affordable housing on the basis of carpet area and cost…We have expanded the definition of affordable housing so that aspiring people can buy slightly bigger (houses), so 60 sq metre carpet area in metros and 90 sq metre outside the metros which approximate translates to a 2-bed room house in a metro and a possibly 3-bed room house in non-metros. This will come into effect from April 1,2019,” the finance minister said.

gst real estate 1%
gst real estate 1%


For GST applicability on affordable housing, currently there is no valuation threshold and the calculation of carpet area varies from project to project.

With regard to those properties where construction work has already begun, Jaitley said a committee of officers will draft the transition rules and frame guidelines.

“The fitment committee and law committee by March 10 will draft those guidelines and immediately place before the GST Council which will meet via video conference so that ministers do not have to travel to Delhi in election period,” he said.

To ensure that the real estate sector does not go back to cash economy and to fix the accountability of back supply chain, a very high percentage of goods will have to be procured from GST registered dealer, Jaitley added.

“For that back chain, a condition will be put that a very high percentage of purchases to avail of this will have to be from registered dealers. The GoM has proposed 80 per cent. Whether it is 80 per cent or more, the group will reconsider it and present before the council,” he said, adding this will ensure that the back chain does not go to a cash-based system.

West Bengal Finance Minister Amit Mitra, however, flagged issues with respect to the provision that a certain percentage of goods has to be procured by a builder from a registered dealer.

“The industry is going through bad period, (it) should get stimulated but with these complications, they will be caught in inspector raj, they will be caught in hawala,” Mitra said.

Jaitley further said the officers’ committee will also discuss suggestions of states with regard to those apartments where there are commercial space, shops. The committee will look into whether it should be permitted and if allowed then how much percentage.

GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.

“This decision is certainly going to give a good boost to the under-construction apartments because people were otherwise waiting for them to get completed, and that was also stopping the money flow into the real estate sector,” he said.

The GoM on real estate under Gujarat Deputy Chief Minister Nitin Patel had earlier this month suggested lowering GST rate on under-construction flats to 5 per cent and affordable housing to 3 per cent.

On GST on lottery, Jaitley said since Punjab and Kerala did not attend the previous meeting of GoM and it was decided that a meeting of panel be reconvened.

The GoM has favoured a uniform GST rate of either 18 per cent or 28 per cent on both state-run and state-authorised lotteries.

The GST Council meeting which was held on February 20 through video conference to discuss real estate and lottery taxation had to be adjourned for February 24 as non-BJP states demanded that a face-to-face meeting be convened to discuss such crucial issues.


Source : https://realty.economictimes.indiatimes.com

Source : Youtube.com, Zee News

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