- Big Boost To Real Estate Sector
- Big Relief To Home Buyers
- 5% GST will be levied for non-affordable under construction houses from current 12 %
- 1% GST will be levied on affordable housing
- These Decisions will come into effect from 1st April 2019
- Milestone Decision in the direction of achieveing the target of housing for all : Arun Jaitley
In its 33rd meeting the GST Council has accorded big relief to Real Estate Sector. GST rate on affordable housing has been reduced to 1% from 8% & for others from 12% to 5% for both without ITC. This will give boost to housing for all & fulfill aspirations of Neo/Middle classes.
Union 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. The move is set to be implemented from April 1, 2019.
5% GST Rate For Under-Construction Properties
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.
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.
Advantages of the recommendations made:
The new tax rate in principle was approved by the Council taking into consideration the following advantages:-
- The buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%.
- Interest of the buyer/consumer gets protected; ITC benefits not being passed to them shall become a non-issue.
- Cash flow problem for the sector is addressed by exemption of GST on development rights, long term lease (premium), FSI etc.
- Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing.
- Tax structure and tax compliance becomes simpler for builders.
GST Council decided that the issue of tax rate on lottery needs further discussion in the GoM constituted in this regard.