GST Council gives a Significant Boost to the Realty Sector
Mar 05, 2019 Real Estate News
In a recent move, the GST Council in its 33rd meeting slashed tax rates for affordable as well as non-affordable segments, while providing a significant reason to cheer to the real estate sector and home buyers. The council has agreed to reduce the GST rate on under-construction properties in the normal category to 5 percent from 12 percent and affordable housing to 1 percent from 8 percent. The prices will be in effect from April 1, 2019.
However, after the tax rate cut, the real estate players will not be able to claim the input tax credit(ITC), making the issue of passing benefits of ITC to the home buyers irrelevant. As a result, The unused ITC that use to get added to the project’s end cost now gets removed, making the property prices further affordable.
The Council also redefined the term affordable housing by adapting twin definition for affordable housing based on cost and carpet area. For metro cities like Delhi NCR, Kolkata, Chennai, Mumbai MMR region, Hyderabad, and Bengaluru, the affordable housing segment will include properties having carpet area up to 60 square meters and cost up to Rs 45 lakh. Whereas for non-metro cities, properties up to 90 square metre carpet area will fall into the affordable housing segment, ranging up to Rs 45 lakh.
Moreover, the meeting also decided that the intermediate tax on development rights such as Joint Development Agreement (JDA), transfer Development Rights (TDR), FSI, long term lease (premium) shall be let off only for those properties on which GST is payable.
Overall, with all these initiatives in place, all we can hope is better days for the glooming real estate sector and much-awaiting home buyers especially the end users.
However, after the tax rate cut, the real estate players will not be able to claim the input tax credit(ITC), making the issue of passing benefits of ITC to the home buyers irrelevant. As a result, The unused ITC that use to get added to the project’s end cost now gets removed, making the property prices further affordable.
The Council also redefined the term affordable housing by adapting twin definition for affordable housing based on cost and carpet area. For metro cities like Delhi NCR, Kolkata, Chennai, Mumbai MMR region, Hyderabad, and Bengaluru, the affordable housing segment will include properties having carpet area up to 60 square meters and cost up to Rs 45 lakh. Whereas for non-metro cities, properties up to 90 square metre carpet area will fall into the affordable housing segment, ranging up to Rs 45 lakh.
Moreover, the meeting also decided that the intermediate tax on development rights such as Joint Development Agreement (JDA), transfer Development Rights (TDR), FSI, long term lease (premium) shall be let off only for those properties on which GST is payable.
Overall, with all these initiatives in place, all we can hope is better days for the glooming real estate sector and much-awaiting home buyers especially the end users.
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