The GST [Goods and Service Tax] council has slashed the rates to 5 percent on under-construction properties and 1 percent on affordable homes. The same will come into effect from 1st April.
At present, the Goods and services tax is applicable at 12 percent along with input tax credit (ITC) on the payments that are made for under-construction property and even for ready-to-move-in one.
This inclusion is levied on the properties that have not received completion certificate also known as CC at the time of sale.
Similarly, the current tax rate is 8 percent for properties under affordable housing units.
Arun Jaitley, Union finance minister and the head of GST Council said that a GoM [Group of Ministers] had been formed to suggest changes as the prospects felt that the advantages of Input Tax Credit are not being forwarded to them.
He further said that the council has decided to apply 5 percent and 1 percent tax after removing Input Tax Credit on both under-construction and on affordable homes respectively.
Jaitley also said that in order to keep the real estate sector from going back to cash-based transactions on the account of removing ITC, the developers will now have to buy very high percentage that will be decided by the GST council of their inputs from GST registered dealers.
However, the deducted rates will boost the Indian property market as it will fulfill the aspirations and business of both the homebuyers and the sellers.
Also, the council reformed the definition of affordable housing to offer a maximum benefit of GST and thus escalated the same category to flats having a maximum value of Rs.45 lakh. Also the flats measuring a carpet area of 60 sq. mtr in metro cities including Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata will now come under affordable housing. Apart from this, flats having a carpet area of 90 sq. mtr. in non-metros will also be termed as affordable homes.
Union FM also informed that a draft of transition rules and guidelines will be sent by the committee of officers in areas where the construction work has already begun. The GST rate is not applicable on the properties that have received Completion Certificate at the time of sale.