New Delhi, Feb 24: The 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 in order to boost the residential segment of the real estate sector.
The recommendations were made by the GST Council in its 33rd meeting held today, that the GST shall be levied at effective GST rate of 5% without ITC on residential properties outside affordable segment; GST shall be levied at effective GST of 1% without ITC on affordable housing properties.The new rate shall become applicable from 1st of April, 2019.
The definition define by the GST Council in its 33rd meeting held today mention that, A residential house or flat of carpet area of upto 90 sqm in non-metropolitan cities or towns and 60 sqm in metropolitan cities having value upto Rs. 45 lacs both for metropolitan and non-metropolitan cities. The Metropolitan Cities are Bengaluru, Chennai, Delhi NCR,limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad, Hyderabad, Kolkata and Mumbai whole of MMR.
The GST exemption on TDR and JDA, long term lease mention that the Intermediate tax on development right, such as TDR, JDA, lease, FSI shall be exempted only for such residential property on which GST is payable. Details of the scheme shall be worked out by an officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.
Advantages of the recommendations made by the 33rd meeting of the GST council today that ,the new tax rate in principle was approved by the Council taking into consideration the following advantages the the buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%. Interest of the buyer or consumer gets protected; ITC benefits not being passed to them shall become a non-issue.
TheCash flow problem for the sector is addressed by exemption of GST on development rights, long term lease, FSI etc. Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing. Tax structure and tax compliance becomes simpler for builders.
The GST Council decided that the issue of tax rate on lottery needs further discussion in the GoM constituted in this regard.The decisions of the GST Council have been presented in this note in simple language for easy understanding. The same would be given effect to through Gazette notifications and circulars which alone shall have force of law.
