In a major fillip to the housing sector, the Goods and Services (GST) Council on Sunday (24 February) recommended lowering GST levy on under-construction homes, including in the affordable segment. The new GST regime for the real estate sector will come into effect from 1 April.
Under the new GST structure approved by the council, normal under-construction houses will now attract GST at 5 per cent against the present effective rate of 12 per cent. The levy on affordable homes will be 1 per cent against the current 8 per cent. Both these levies will be without Input Tax Credit.
The move is expected to come as a major boost for under-construction houses as the current GST rates forced buyers to go for ready-to-move-in properties.
In its 33rd meeting the GST Council has accorded big relief to Real Estate Sector. GST rate on affordable housing has been reduced to 1% from 8% & for others from 12% to 5% for both without ITC.This will give boost to housing for all & fulfill aspirations of Neo/Middle classes.— Arun Jaitley (@arunjaitley) February 24, 2019
The GST Council also re-defined an affordable home. Under the new definition, it will be a house/flat of carpet area up to 90 sq m in non-metropolitan cities/towns, and 60 sq m in metropolitan cities having value up to Rs 45 lakh (for both).
Metropolitan cities in India include Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).
Under the new rules, though the cap on price of the affordable property is Rs 45 lakh for both metro and non-metro projects to get the 1 per cent tax rate, the carpet area criterion will be different.
“We wanted to give a boost to the real estate sector, as well as relief to the middle class, neo-middle class and the aspirational middle class,” Union Finance Minister Arun Jaitley told reporters .
A panel of state Finance Ministers on real estate sector led by Gujarat Deputy Chief Minister Nitin Patel had suggested bringing down the rates on under-construction properties to five per cent, without input credit, from 12 per cent and for affordable housing, to three per cent from the current eight per cent.
Led by Punjab finance minister Manpreet Badal, Congress ruled states had opposed the proposal claiming that different States have different taxation procedures and a uniform rate without discussing these would not be bona fide.