In order to address reports of slowdown in real estate sector and reduced sale of under-construction houses the GST Council slashed the GST rate on under-construction houses to 5% from current 12% on non-affordable category while the GST on affordable housing segment will be levied at 1% from the current 8%. The new rates will be effective starting April 1.
Affordable housing: Under the government guidelines a residential house/flat of carpet area of upto 90 sq m in non-metropolitan cities/towns and 60 sq m in metropolitan cities having value upto Rs. 45 lakhs (both for metropolitan and non-metropolitan cities).
Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
The intermediate tax on development right, such as TDR, JDA, lease (premium), FSI shall be exempted only for such residential property on which GST is payable. Details of scheme are being worked out.
The government says that the unutilised ITC which used to become cost at the end of the project gets removed and should lead to better pricing. Cash flow problem for the sector is addressed by exemption of GST on development rights, long term lease (premium), FSI etc. This will also result in better tax structure and tax compliance will becomes simpler for builders.
CREDAI NCR President, Pankaj Bajaj said, “It is a great relief for both the real estate industry and the home buyers. Home buyers were shying away from under construction property due to the high GST. It now makes sense to go ahead and buy a home as the prices will become really reasonable.” Bajaj added, “In the affordable category, the loss of input credit will hurt the developers and increase their costs. But 1% GST will not hurt the customer and at least they will not postpone the buying decision.”