New Delhi: The GST Council on Sunday slashed tax rates for under-construction flats to 5 percent and affordable homes to 1 percent, effective April 1.
Currently, the goods and services tax (GST) is levied at 12 percent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is 8 percent.
What will be the definition of affordable housing?
A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto Rs 45 lakh (both for metropolitan and non-metropolitan cities).
Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
GST exemption on TDR/ JDA, long term lease (premium), FSI:
Intermediate tax on development right, such as TDR, JDA, lease (premium), FSI shall be exempted only for such residential property on which GST is payable.
Advantages of the recommendations made by the GST Council
The buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%.
Interest of the buyer/consumer gets protected.
ITC benefits not being passed to them shall become a non-issue.
Cash flow problem for the sector is addressed by exemption of GST on development rights, long term lease (premium), FSI etc.
Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing.
Tax structure and tax compliance becomes simpler for builders.