Recommendations made:
- GST rate:
- GST shall be levied at effective GST rate of 5% without Input Tax Credit (ITC) on residential properties outside affordable segment;
- GST shall be levied at effective GST of 1% without ITC on affordable housing properties.
- Effective date: The new rate shall become applicable from 1st of April, 2019.
- Definition of affordable housing shall be:
- A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto 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).
- GST exemption on TDR/ JDA, long term lease (premium), FSI: 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.
Advantages of the recommendations made:
- Real estate sector is one of the largest contributors to the national GDP and provides employment opportunity to large numbers of people.
- “Housing for All by 2022” envisions that every citizen would have a house and the urban areas would be free of slums. There are reports of slowdown in the sector and low off-take of under-construction houses which needs to be addressed.
- To boost the residential segment of the real estate sector, the above-mentioned recommendations were made by the GST Council in its 33rd meeting.
- The buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%. Tax structure and tax compliance becomes simpler for builders.
