Impact of GST cut on Under construction property in 33rd GST Council Meeting on 24th Feb 2019

Finance Minister Arun Jaitley informed that GST on Under construction building to be reduced from 12% (after abatement towards land cost) to 5%, a reduction of 7%. The Council also reduced the rate of affordable housing from 8% to 1% a reduction of 7%.

GST Council redefined the meaning of affordable housing as follows:

Any house or flat of carpet area of

  1. upto 60 sq mtrs or less(approx 645 sq ft) in metro cities and
  2. upto 90 sq mtrs or less(approx 968 sq ft) in non-metro cities and towns
  • the value of such house or flat should be Rs 45/- lakhs or less.
  1. No Input Tax Credit will be allowed on input materilas, labour cost.
  2. Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
  3. 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.

The said rates will become applicable from 1st April 2019.

Impact on real estate sector

It is a big relief to the real estate sector.

Immediate impact on the real estate will be good as lot of unsold stock will move out fast due reduction in GST rates by 7 % in both categories of buyers.

This may give impetus to the Pradhan Mantri Awas Yojana and lot many people may buy the affordable housing. They will also get the benefit of subsidy on interest on Housing Loan up to Rs. 2.60 Lakhs under Centers credit-linked interest subsidy scheme.

Housing sector will invest more in the month of March 2019 to take the benefit of Input tax Credit on Inputs as well as Plant & Machinery as ITC will not be available for inputs after 1st April 2019.

Unutilised ITC which was forming part of cost gets removed

Under construction property which builders were constructing at slow pace will also get a boost and lot of houses will be made ready for possession. This will also resolve cash flow problem of builders.

Tax compliance also becomes simpler for builders.

It will create employment.

There may be some price hike in under construction property as non availability of ITC will have a negative impact on cost of construction. This may also boost sales of under construction new projects, as lot of buyers who may want to take advantage of both ie reduction in GST rates as well as selling price will book new under construction flats in the beginning of April 2019 (before builders increases price). This will have a positive impact on the sector.

GST Council will decide in March meeting whether small portion of commercial space attached to residential complexes will also get this benefit.

Impact on under construction property buyers

It is a big relief to the home buyer.

The buyer gets to buy property at cheaper rates due to reduction in GST rates by 7% in both categories affordable as well as others.

Buyers had an issue that ITC benefit was not passed on to them. So this issue will be resolved and they will feel protected.

Those who have already booked under construction property will get benefit of GST on balance payment.

Overall it is win win situation for both builders and home buyers.

Disclaimer: All views are personal and shall not be taken as opinion or statement of Law.

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6 Comments

  1. Kirti says:

    Have booked a flat of 47 lakhs and paid 80% of the money, but handover is planned in July 2019 only. Will I get a refund of 7% ?

  2. arun says:

    I had bought raw house of carpet area 950 sqr ft with total prise 30 lac and got possession in February 2019.
    paid GST 12%.
    Now I will get refund or nor

  3. M Malek says:

    Hello Sir,
    I have booked flat @12 lacks and will get a passation in July2019. I have already paid part payment of 8 lacks and at the time of passation i have to pay 1.4 lacks of 12% GST based on 12 lacks.
    So, now if GST will apply at 5% rate in next month then will my GST calclation will on full amount or rest of 4 lacks amount.

    Thanks in advance.

  4. vswami says:

    A REshare(:

    “…Big Relief for Home Buyers-….” ?! If, however, critically analysed, and mindfully understood , in one’s view, that is not really so. On the contrary, buyers , as is to be imagined, are going to be fraught with problems, the so called BIG RELIEF being elusive as yet. For there could be any number of buyers . from whom promoters have collected monies as per the old RATE , WITHOUT RECKONING ‘ÍPC’ DUE to the latter, prematurely/preemptiively so, even while . all along, thefinal rate to be charged to buyers has been in a state of absolute flux /kept in suspense , are doomed to be left in an unenviable TRISHANKU like situation. For an attempted dilation of those not-so-obvious but hidden aspects, suggest to look through the thoughts and viewpoints shared on FB/Linked in in recent times . courtesy

  5. Surendra Kumar says:

    Sir,My Query is as follows

    Mr.X booked a flat in Oct’15 for the sale consideration of Rs.1,20,00,000/-. 1st Progress billing (20%)is received with ST@4.2% in the same month, 2nd,3rd,4th & 5th (each 10%) Progress billings are received in May’17 with ST@4.5% (4.2% ST, 0.15% SB Cess & 0.15% KK Cess) and again 6th & 7th Progress bills are received by Dec’2018 with GST@12%. But Mr.X has paid only Rs.1,00,000/- till date where as the Developer has already remitted Entire tax amount on Progress bills raised to the department. Is Mr.X is eligible for the reduction in rate of GST@5% for the Unpaid amount or Unbilled value (20%) let’s assume both will be happened after 01.04.2019?

    Thanks in Advance

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