The GST Council, in its 33rd meeting held on 24th Feb 2019, addressed the reports of slowdown in the real estate sector and low off-take of under-construction houses. Real estate sector, being one of the largest contributors to the national GDP and with the Government’s vision on “Housing for All by 2022”, following recommendations were made by the GST Council in this meeting to boost the residential segment of the real estate sector:

(I) Rationalization of GST Rate:

Residential Segment Type Existing Effective GST Rate New Effective GST Rate to be levied ITC Availability
Residential properties outside affordable segment 12% 5% Without ITC
Affordable housing properties 8% 1% Without ITC

For the purpose of the above new GST Rate, coverage of affordable housing shall be – A residential house/flat of carpet area of up-to 90 sqm in non-metropolitan cities / towns and 60 sqm in metropolitan cities having value up-to Rs. 45 lacs (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)

(II) GST exemption has also been proposed on Transfer Development Rights (TDR) / Joint Development Agreement (JDA), long term lease (premium), Floor Space Index (FSI) – GST Council has specified that an Intermediate tax on these development rights will be exempt from GST for such residential properties on which GST is payable.

Press release document states that details of the scheme shall be worked out by an officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.

The new GST rate shall be applicable from 1st April 2019.

(III) Benefits of the above recommendation made by the GST Council are outlined below:

  • 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.
  • Un-utilized 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.

GST Council also decided that the issue of tax rate on lottery needs further discussion in the GoM constituted in this regard and the same shall be addressed in the upcoming meetings. Other agenda’s of this meeting – GST rate cuts on cement and duty drawback scheme for exporters remained out of the discussion.

(Author can be reached at dipak.twr08@gmail.com)

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4 Comments

  1. Abhijit Datta Lotlikar says:

    I bought under-construction flat in 2018 and paid 90% to builder with GST and possession will be in june 2019. Want to know whether now this GST reduction is applicable for us ?.

  2. Thomas Mathew says:

    I have bought a Flat in 2018 which is still under construction, i have paid the complete amount to the builder including the GST , wanted to know whether the GST reduction is applicable for this scenario in which the Flat is still under construction and the completion certification is expected to be provided in the Month of June 2019 ?

  3. MD. YOUSUF says:

    The developers will now purchase a significant portion of the raw materials without paying tax. ( In absence of purchase tax on purchase from unregistered persons) to minimize their cost and augment their profit.

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