GST on Houses under Construction Slashed to 5% from 12%; Affordable Housing to attract 1%
Bringing a big cheer to the housing sector and particularly to the home buyers, the Goods and Services Tax Council has decided to slash the tax rates on under-construction housing properties to 5 percent from the existing 12 percent. Finance Minister Arun Jaitley announced the decision on Sunday at the GST Council Meet.
The council has eliminated the input tax credit for the builders, under the GST new rates. Further, strengthening the way for the ‘Housing for All by 2022,’ the council has bottomed the GST rates for affordable housing to 1 percent from the current 8 percent. (It falls under concessional GST slab of 12 %, but effective rate is 8 % after deducting 4 percent land value.)
Extending the scope of benefit for affordable housing, the concessional rate can be availed for units measuring up to 60 sq metre and costing up to Rs 45 lakh in metros; while for non-metros the threshold for the same is set up to 90 sq metre. The new tax rates will be levied from April 1, 2019.
The current GST rate for under-construction properties and ready-to-move-in flats lacking completion certificate at the time of sale is 12 percent (It comes under 18 % GST slab but effective rate is 12 % as 6 % land value is deductible). Ready properties with completion certificate do not attract GST. The move will undoubtedly boost the highly strained construction sector that was struggling with low sales of housing units.
While announcing the new GST rates, Finance Minister Jaitley said that the move is intended to boost to the real estate sector as it is burdened under a huge inventory problem. The cut is focused to make owning a house cheaper for the common man.
The GST Council has defined metro areas as:
- Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad),
Jaitley has also added that the Council will draft the transition rules for new directive carefully before March 10.
The move will significantly push the demand for affordable units and boost the sales of under-construction properties. The decision is also seen as a step towards simplification of tax structure and compliance for builders.