Home buyers can rejoice as the Goods and Services Tax (GST) Council, has reduced tax rates from the existing 12% on under-construction housing properties to 5% without input tax credit. The Council comprises state and federal finance ministers.
Also, the Council has decreased GST rates on affordable housing from the existing 8% to 1%, while expanding the scope of affordable housing to properties costing up to INR 45 lakh and measuring 60 sq metre in metros and 90 sq metre in non-metro cities. The new tax rates will be effective from April 1, 2019.
The 12% GST rate on under-construction properties has been seen as a major dampener for homebuyers today. Honey Katiyal, Founder & CEO, Investors Clinic told The Tech Panda, “While there is no GST applicable on ready-to-move-in properties, the cost of buying such property is always higher than the under-constructed ones. Thus, there is no way out for the homebuyer and they will have to bear a high cost, which in most cases becomes a reason to defer or cancel the purchase plans. It is not a good sign for the economy in overall.”
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Katyal further says that the real estate sector has shown some offshoots of revival in the past few quarters, and to sustain the momentum, it certainly requires rationalization of GST on real estate transactions.
“The recommendations of the GST Panel to reduce the GST rate from 12% to 5% for the general category, and from 8% to 1% for the affordable housing segment factor-in the sentiments of the market and consumers, and hopefully these will be implemented sooner than later. Clearly defining the affordable housing units in metro and non-metros will reduce the ambiguity and help in reducing complications in the future,” he added.
