To boost demand in the real estate sector, the GST Council in its recently held meeting, slashed tax rates for under-construction flats.
To boost demand in the real estate sector, the GST Council in its recently held meeting, slashed tax rates for under-construction flats to five percent and affordable homes to one percent, effective April 1, 2019. Currently, the GST is levied at 12 per cent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats that are yet to get completion certificate. For affordable housing units, the existing tax rate is eight percent.
The Council also expanded the definition of affordable housing for the purpose of availing of GST benefits. Now, the affordable flats will be those which cost up to Rs. 45 lakhs and measures 60 sq. metres carpet area in metro cities (Delhi-NCR, Bengaluru, Chennai, Hyderabad, Mumbai & Kolkata) and 90 sq. metres carpet area in non-metros. The developer community has appreciated the announcement and has high hopes with it.
Mapsko Casa Bella
The Gurugram based developer; Mr. Raj Singhal, CEO - Elan Group shared, “It is a decision in the right direction, reducing overall tax liability for developer and customer alike. Despite reduction of GST, discontinuation of input tax credit results in increased tax incidence impacting the demand and sentiments for the unsold inventory. Restoration of input tax credit, or reduction in GST on construction inputs/ raw materials to 12% from average 18% currently would mitigate the additional tax liability and help revive the segment."
Amir Husain, President - Sales and Marketing, Orris Infrastructure Pvt. Ltd. has also shared a nod on the same view. He asserted, “This is a huge relief for home buyers. GST Council's move to reduce tax rates on properties is an excellent decision and it will bring positive outcomes for the sector in terms of demand. The new effective GST rate for under construction sector has been brought down and the move will provide a boost to the housing segment. It will also reduce the buyers’ payout on the overall purchase.”
The policy change is hailed as a much awaited ‘revolutionary step’. The lower levy is hoped to give a boost to ‘Housing for All’.
“Developers and homebuyers were awaiting the reduction in tax rates by GST council. It will go a long way in helping with the clearance of inventories (completed homes without completion certificates). Overall, this move will build a pace for further growth of the realty industry." said Mr. Rahul Singla, Director, Mapsko Group.
The developers are also with the view that the government should allow ITC in the coming times.
“Reducing GST rate on under-construction and affordable properties will benefit the homebuyers and would propel the realty market in 2019. Supporting the decision the realty market hopes that along with a reduction in GST the government allows ITC on under construction properties so that developers are not burdened by the tax load, we hope the government will consider this in coming future. ITC with 5 per cent GST rates can ease the burden from developers of affordable housing and encourage the central government’s dream of Housing for All by 2022,” said Sumit Berry, Managing Director, BDI Group.
It can be concluded that the real estate sector will grow further with such initiatives and a bright future is in the offing.