Source : Housing | Dated : Mar 24, 2020
The GST Council has reduced the GST rates for under-construction flats and affordable housing to five per cent and one per cent, respectively and also increased the carpet area of flats under affordable housing
Update on March 19, 2019: The GST Council, on March 19, 2019, approved a transition plan for the implementation of the new tax structure for housing units, revenue secretary AB Pandey said. As per the plan, builders will be allowed to choose between the old tax rates and the new ones for under-construction residential projects, to help resolve input tax credit (ITC) issues.
As per the decision taken by the GST Council, the developers of residential projects which are incomplete as on March 31, 2019, will have the option either to choose the old structure with ITC or to shift to the new 5% and 1% rates, without ITC. Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019), Pandey explained. The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects.
Update on February 24, 2019: GST on under-construction flats slashed to 5%, affordable housing to 1%
To boost demand in the real estate sector, the GST Council, on February 24, 2019, slashed tax rates for under-construction flats to five per cent and affordable homes to one per cent, effective April 1, 2019. 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 the completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is eight per cent.
Details of GST rates proposed from April 1, 2019
The Council also expanded the definition of affordable housing for the purpose of availing of GST benefits, to those flats costing up to Rs 45 lakhs and measuring 60 sq metres carpet area in metros (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata) and 90 sq metres 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 metres carpet area in metros and 90 sq metres outside the metros, which approximate translates to a two-bedroom house in a metro and a possibly three-bedroom house in non-metros. This will come into effect from April 1, 2019,” Jaitley said. For GST applicability on affordable housing, currently there is no valuation threshold and the calculation of carpet area varies from project to project.