NEW DELHI, Feb 24: To boost demand in the real estate sector, the GST Council today slashed tax rates for under-construction flats to 5 per cent and affordable homes to 1 per cent, effective from 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.
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.
For GST applicability on affordable housing, currently there is no valuation threshold and the calculation of carpet area varies from project to project. (PTI)
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