New Delhi: In a huge relief to homebuyers, the Goods and Services Tax (GST) Council on Sunday reduced the GST rate on affordable housing to 1 per cent from the prevailing 8 per cent and expanded the ambit of the affordable segment. The council also slashed the tax rate on under-construction housing properties to 5 per cent without input tax credit, from the existing 12 per cent.
The Council, in its 33rd meeting, said a residential property priced at Rs 45 lakh or below will now fall under the category as affordable and will be taxed at 1 per cent, clarifying that the concession relate to property measuring 60-sq metre in metros and 90-sq metre in non-metro cities.
The new tax rates will be effective April 1 this year.
Currently, the GST is levied at 12 per cent on payments made for under-construction properties or ready-to-move-in flats where completion certificate has not been issued at the time of sale.
However, the GST Council headed by Finance Minister Arun Jaitley told reports here that builders would not be able to claim input tax credit (ITC) under the new GST rates.
The GST is not levied on real estate properties for which completion certificate has been issued at the time of sale.
The Council, however, deferred a decision on lotteries, with Jaitley saying that the Group of Ministers (GoMs) will meet again to discuss the proposal. Currently, state-run lotteries attract 12 per cent GST, while state-authorised lotteries attract 28 per cent.
Jaitley said the criteria for affordable housing in Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata and Mumbai MMR region, will be carpet area of up to 60 square metres and priced up to Rs 45 lakh. For non-metro cities, the criteria will be defined based on carpet area of up to 90 sq metres and cost up to Rs 45 lakh.
Reacting the development, M.S. Mani, Partner, Deloitte India, said: analysts said that real estate sector needed rate reductions to push sales of non-afforbable sections as well. “With these reductions, the GST rate on normal under-construction apartments would be a little lower than that prior to introduction of GST, and that affordable housing would be significantly lower than before,” said.
Niranjan Hiranandani, National President, Nati-onal Real Estate Develop-ment Council (Nardeco), said: “This announcement gives an impetus to the affordable housing and enthuse homebuyers to close the sale deals. The GST rate on cement has not been reduced as was expected, at 28 per cent it remains among the highest taxed inputs for construction – and there will be no input tax credit, so developers will face a challenging time.”
