Houses under PMAY to Attract 8 Percent GST
Feb 06, 2018 Home Trading Steps
With immediate effect, houses under PMAY will attract 8 percent GST rate which is good news for home buyers. The GST council stated that the under construction homes falling (constructed or acquired) under Credit Linked Subsidy Scheme (CLSS) for Economically Weaker Sections (EWS) / Lower Income Group (LIG) / Middle Income Group-1 (MlG-1) / Middle Income Group-2 (MlG-2) under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY Urban) will now be charged 8 percent that was earlier calculated at 12 percent. But those who are not eligible for CLSS they will continue paying the higher GST rate.
The home loans taken under CLSS will get the interest subsidy to the eligible poor (EWS/LIG/ MIG-I/ MIGII) for either construction or acquire a house.
Although the real estate sector is not a part of the GST framework, but here real estate refers to the land value and not the construction activities of a house. GST is applicable to the cost of construction of a building and is incurred by the developer. It is not applicable to the buildings or the houses that are already constructed. Due to this the under construction properties becomes expensive than the ready to move in properties. As according to the Central Board of Excise and Customs (CBEC), "Sale of the building is an activity or consideration which is neither a supply of goods nor a supply of services." Due to this the ready to move in properties are cheaper and lucrative than under construction properties.
As of now, properties acquired under CLSS attracted 18 percent GST rate (12 percent GST rate is effective only after deducting the value of the land). The 12 percent GST rate is applicable only on the houses constructed under the components of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban), namely (i) Redevelopment of existing slums using land as a resource component (ii) Affordable housing in partnership with other entities and (iii) Beneficiary-led individual house construction / enhancement. But now the reduction has been extended to the houses under CLSS as well. Hence the buyers now will be eligible for interest subsidy under this scheme at a much lower rate of GST that is 8 percent that is effective after deducting the land value.
The GST council issued a statement on how reducing the GST helps, that stated, “It may be recalled that all inputs used in and capital goods deployed for construction of houses attract GST of 18 percent or 28 percent. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 percent (after deducting the value of land)."
The note further added that, “As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers."
Hence, it can be said that by lowering GST tax rate, the developers will be incentivised due to which they will follow the system without dodging it.
The home loans taken under CLSS will get the interest subsidy to the eligible poor (EWS/LIG/ MIG-I/ MIGII) for either construction or acquire a house.
Although the real estate sector is not a part of the GST framework, but here real estate refers to the land value and not the construction activities of a house. GST is applicable to the cost of construction of a building and is incurred by the developer. It is not applicable to the buildings or the houses that are already constructed. Due to this the under construction properties becomes expensive than the ready to move in properties. As according to the Central Board of Excise and Customs (CBEC), "Sale of the building is an activity or consideration which is neither a supply of goods nor a supply of services." Due to this the ready to move in properties are cheaper and lucrative than under construction properties.
As of now, properties acquired under CLSS attracted 18 percent GST rate (12 percent GST rate is effective only after deducting the value of the land). The 12 percent GST rate is applicable only on the houses constructed under the components of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (Urban), namely (i) Redevelopment of existing slums using land as a resource component (ii) Affordable housing in partnership with other entities and (iii) Beneficiary-led individual house construction / enhancement. But now the reduction has been extended to the houses under CLSS as well. Hence the buyers now will be eligible for interest subsidy under this scheme at a much lower rate of GST that is 8 percent that is effective after deducting the land value.
The GST council issued a statement on how reducing the GST helps, that stated, “It may be recalled that all inputs used in and capital goods deployed for construction of houses attract GST of 18 percent or 28 percent. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 percent (after deducting the value of land)."
The note further added that, “As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers."
Hence, it can be said that by lowering GST tax rate, the developers will be incentivised due to which they will follow the system without dodging it.
Looking for property portal?
Related Articles
-
-
-
Buying Property in the Wife’s Name
Sep 09, 2016 -
See comments (0)
Write a comment
