New Delhi: Your dream home just became cheaper. The Centre on Sunday slashed GST on sale of under construction residential properties to 5 per cent, from the existing 12 per cent, in a big relief to home buyers, especially from the middle and the aspiring classes.
Prime Minister Narendra Modi’s government is keen to stimulate the economy before the general elections due by May and the boost for the real-estate sector is part of this exercise. It is also a key component of the “Housing for All by 2022” vision of the government. This concession will be allowed to all housing projects which are not in the affordable housing category; at the same time, the council also decided to lower the tax rate on affordable housing projects to 1 per cent from 8 per cent.
The council also altered the definition of affordable housing and said any house built on an area of 60 square metres or less in metro cities will now be categorised as affordable housing. For non-metro cities, the area would be 90 square metres and below.
These are essentially houses having value up to Rs. 45 lakh. Currently, GST is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats. Twelve per cent is also levied in cases where completion certificate is not issued at the time of sale.
No tax is levied in cases where completion certificate has been issued at the time of sale. However, builders will not be able to claim input tax credit (ITC) under the new GST rates. With regard to lotteries, the GST Council, however, deferred its decision with Finance Minister Arun Jaitley saying that the Group of Ministers will meet again to discuss the proposal.
Currently, State run lotteries attract 12 per cent GST, while state-authorised ones attract 28 per cent. A panel of ministers on real estate sector led by Gujarat deputy chief minister Nitin Patel had suggested bringing down the rates on under-construction properties to 5 per cent, without input credit, from 12 per cent and for affordable housing, 3 per cent from 8 per cent.
The move was not implemented as non-BJP ruled states had opposed announcing the decision in their absence in the last meeting, held through video conference. Interim finance minister Piyush Goyal had favoured a cut in tax rates for real estate.