On February 24, 2019: To boost demand in the real estate sector, the GST Council, on February 24, 2019, slashed tax rates for under-construction flats to five per cent and affordable homes to one per cent, effective April 1, 2019. Currently, the Goods and Services Tax (GST) is levied at 12 per cent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats, where the completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is eight per cent.
In the 33rd GST Council meeting held on 24th February, 2019, GST Council slashed the GST rates on under-construction property as follows:
- Effective GST rate of 5% without ITC on residential properties outside affordable segment
- Effective GST of 1% without ITC on affordable housing properties
The Council also expanded the definition of affordable housing for the purpose of availing of GST benefits, to those flats costing up to Rs 45 lakhs and measuring 60 sq metres carpet area in metros (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai-MMR and Kolkata) and 90 sq metres carpet area in non-metros. “We have adopted twin definition of affordable housing, on the basis of carpet area and cost. We have expanded the definition of affordable housing, so that aspiring people can buy slightly bigger (houses), so 60 sq metres carpet area in metros and 90 sq metres outside the metros, which approximate translates to a two-bedroom house in a metro and a possibly three-bedroom house in non-metros. This will come into effect from April 1, 2019,” Jaitley said. While this announcement of lower rate effective April, 1 2019 had brought rejoice for the real estate sector, one should not turn a blind eye to the complications with respect to the said amendment. Under this amendment, builders will not be able to avail and utilize ITC while discharging GST at lower rates.
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