GST on Under-Construction Real Estate Projects at 12 percent
Jul 06, 2017 Real Estate News
There have been numerous speculations on the effect of GST on the real estate sector. Experts have confirmed that that the GST rate applicable to under construction real estate projects will be 12 percent rather than 18 percent. In addition, the law mandates the developer to pass on the benefit of input tax credit to home buyers.
The GST rate applicable to real estate has been under discussion and some confusion has arisen in the market regarding this. In May this year, the GST Council had decided a 12 percent tax rate construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. It was decided that the value of land would also be included in the amount on which tax would be calculated. The Government had recently raised the GST rate to 18 percent from 12 percent but the land value was exempted from the computation of tax liability.
This altered decision has led to a lack of clarity on how the tax would be calculated. However, industry experts have assured that this confusion is misplaced. There is a reduction of one-third in the value of land when the rate of 18 percent is applied. Thus, the effective GST rate remains 12 percent.
The real estate developer’s association confirmed that the effective GST rate on under construction properties would remain 12 percent. It was also confirmed that the developers would pass on the input tax credit benefits to the buyers.
Earlier, the service tax applicable on a property was calculated at the rate of 15 percent on 30 percent of the total cost of the property. This came to 4.5 percent in effect.
The real estate developmental council earlier appealed for a lower GST of 6 percent rather than 12 percent on under-construction projects. This was done with a view that higher tax would increase the prices and affect the sales of property.
The council also advocated that affordable housing project is exempted from GST as the Government is committed to boosting this sector through interest subsidies and other benefits.
The GST rate applicable to real estate has been under discussion and some confusion has arisen in the market regarding this. In May this year, the GST Council had decided a 12 percent tax rate construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. It was decided that the value of land would also be included in the amount on which tax would be calculated. The Government had recently raised the GST rate to 18 percent from 12 percent but the land value was exempted from the computation of tax liability.
This altered decision has led to a lack of clarity on how the tax would be calculated. However, industry experts have assured that this confusion is misplaced. There is a reduction of one-third in the value of land when the rate of 18 percent is applied. Thus, the effective GST rate remains 12 percent.
The real estate developer’s association confirmed that the effective GST rate on under construction properties would remain 12 percent. It was also confirmed that the developers would pass on the input tax credit benefits to the buyers.
Earlier, the service tax applicable on a property was calculated at the rate of 15 percent on 30 percent of the total cost of the property. This came to 4.5 percent in effect.
The real estate developmental council earlier appealed for a lower GST of 6 percent rather than 12 percent on under-construction projects. This was done with a view that higher tax would increase the prices and affect the sales of property.
The council also advocated that affordable housing project is exempted from GST as the Government is committed to boosting this sector through interest subsidies and other benefits.
Looking for property portal?
Related Articles
-
-
-
-
GST to Boost the Real Estate Sector of the Country
Jul 17, 2017
