GST Rate Reduced!
Great news for residential real estate buyers!
By Evente Clinic
Last year in December, experts were of opinion there will be a reduction in GST rate early this year. The speculation has come true; the GST Council has slashed tax rates for houses in both affordable and non-affordable segments. The news is a big relief for a real estate buyer since the rate of real estate properties would be reduced. The meeting held on 24th February, the all-powerful council took note of the recommendations from the ministerial group on real estate to approve tax cuts for the sector.
This was the 33rd GST Council meeting, in which Finance Minister Arun Jaitley and his state counterparts agreed to bring GST rate on under-construction properties in normal category down to 5 percent. Currently, the GST is levied at 12 percent on payments made for under-construction properties or ready-to-move-in flats where completion certificate has not been issued at the time of sale.
The GST Council has also reduced GST rate for affordable housing to 1 percent from the earlier 8 percent. The new tax rates will come into effect from April 1, 2019.
“This will be a major step in our efforts to give a boom to the real estate sector and making housing affordable for the middle class, neo-middle class and aspirational class.-Finance Minister Arun Jaitley”
However, Goods and Services Tax (GST) is not levied on real estate properties for which completion certificate has been issued at the time of sale.
For developers, notable information is that they will not be able to claim the Input Tax Credit (ITC) after the tax rate cut for the real estate sector. This will make the issue of developers not passing on the benefits of ITC to homebuyers will become irrelevant.
Also, unutilized ITC, which used to be added to the end cost of the project, will now be removed to make prices more affordable for the homebuyer, the Ministry of Finance said in a statement.
The GST Council also decided that intermediate tax on development rights, such as TDR, JDA, lease, FSI shall be exempted only for such residential property on which GST is payable.
As per the experts, even a small increase in sales on the back of reduced GST will give some relief to developers funding issues by catalyzing sales to some degree. To that extent, developers will see some improvement in their balance sheets.
If you are looking to buy a home in the near future, reach out to us with your questions and we will help you with answers