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GST Council reduces GST Rate on Real Estate projects; approves 5% rate for under-construction houses

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.

Feb 25, 2019 16:35 IST
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The Goods and Services Tax (GST) Council met on February 24, 2019 for its 33rd meeting and slashed GST rate on under-construction residential properties and the affordable housing projects.

Here are the revised GST rates:

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.

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

Note: Input Tax Credit 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.

The revised rates will be applicable from April 1, 2019.

The decision was based on recommendations of a Ministerial Panel headed by Gujarat Deputy Chief Minister Nitin Patel.

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 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’.

Benefits of these changes:

The buyer of house will get a fair price.

Interest of the buyer and consumer will get protected.

Cash flow problem for the sector will be addressed by exemption of GST on development rights, long term lease (premium), FSI (Floor Space Index), etc.

Unutilised ITC, which used to become cost at the end of the project, will get removed and will lead to better pricing.

Tax structure and tax compliance will become simpler for builders.

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