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Current Affairs 20 March 2019 Digest 2: GST Council approves transition plan for new tax rates for real estate sector; SpiceJet joins global airlines grouping IATA

The builders will be given a one-time option to continue with the old tax rate of 8 percent or 12 percent with input tax credit (ITC) on ongoing projects where construction and actual booking started before April 1, 2019 and have not been completed by March 31, 2019.

Mar 20, 2019 12:02 IST
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Story 1: Goods & Services Tax: Decisions taken by the GST Council regarding GST rate on Real Estate Sector

The Goods & Services Tax (GST) Council held its 34th meeting on March 19, 2019 to discuss the details for implementation of the recommendations made by the council in its 33rd meeting for lowering GST rate in Real Estate Sector.

The council approved the transition plan to move towards new tax rates for the real estate sector in addition to giving builder an option to continue with the old tax rate, if they want. It undertook following decisions:

Ongoing projects in Real Estate Sector

The builders will be given a one-time option to continue with the old tax rate of 8 percent or 12 percent with input tax credit (ITC) on ongoing projects where construction and actual booking started before April 1, 2019 and have not been completed by March 31, 2019.

This option can be exercised once within a prescribed time and if missed, the new rates shall apply.

New tax rates

For the new projects starting from April 1, 2019, following changes have been made:

In case of affordable houses, the GST rate has been reduced to 1 percent without ITC from 8 percent.

In case of non-affordable houses, the GST rate for under-construction flats and houses has been brought to 5 percent without Input Tax Credit (ITC), down from the present 12 percent.

The new GST rates of 1 percent and 5 percent will be levied on following conditions:

Input tax credit will not be available

80 percent of inputs and input services shall be purchased from registered persons.

If purchases from registered persons are made less than 80 percent, builder will be required to pay 18 percent GST on Reverse Charge Mechanism (RCM) basis.

GST on cement purchased from unregistered person will be levied at 28 percent under RCM.

Definition of affordable housing

An affordable house is a house or flat of carpet area of up to 90 sq m in non-metropolitan cities/towns and 60 sq m in metropolitan cities having value up to Rs 45 lakh (both for metropolitan and non-metropolitan cities).

Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, and Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).

What is Input Tax Credit: Amendment to ITC rules

The Input Tax Credit (ITC) means that at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.

GST Council suggests amendment to ITC rules: The ITC rules will be amended to bring clarity on monthly and final determination of ITC in real estate projects. The amendment will provide detailed procedure for availing input tax credit in relation to commercial units. The Commercial Units are still eligible for input tax credit in a mixed project.

What led the GST Council to undertake such decisions?

The GST Council undertook such decisions after considering that the Real Estate sector is one of the largest contributors to the national GDP and provides employment opportunity to large numbers of people.

However, lately there have been reports of slowdown in the sector and low off-take of under-construction houses. To boost the residential segment of the real estate sector, the GST Council decided to slash the rates on housing.

Such decision was being demanded by the sector especially to boost the government's vision of 'Housing for all by 2022’.

Story 2: International Air Transport Association: SpiceJet joins global airlines’ grouping IATA

Indian budget carrier, SpiceJet on March 19, 2019 announced its membership of global airlines’ grouping ‘International Air Transport Association’ (IATA).

SpiceJet is the first Indian low-budget carrier to join the IATA, which has over 290 airlines as members including Air India, Jet Airways and Vistara.

Significance

SpiceJet’s IATA membership is significant as SpiceJet plans to rapidly expand its international footprint.

The membership will allow SpiceJet to explore and grow its collaborations with international member airlines of the IATA grouping through interlining and code shares.

It will also enable the low cost carrier in seamlessly expanding its network options for its passengers in future.

International Air Transport Association (IATA)

IATA is Geneva-based trade association of the world’s airlines formed to support aviation activity as well as help to formulate industrial policy on aviation issues.

Founded in Havana, Cuba, in April 1945, IATA ensures safety and security in aviation services.

IATA represents 290 airlines in 120 countries, carrying 82 percent of the world’s air traffic.

It is prime formulator of industrial policy to solve the aviation issues and simplify the aviation trade & business such as electronic ticket, bar coded boarding pass, fast travel initiative, self-service baggage options etc.

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