GST Rate reduced for Real Estate Sector

Rec­om­men­da­tions of the 33rd GST Coun­cil meet­ing 

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, fol­low­ing rec­om­men­da­tions were made by the GST Coun­cil in its 33rd meet­ing held today:

New GST rate on Real Estate:

i. GST shall be levied at effec­tive GST rate of 5% with­out ITC on res­i­den­tial prop­er­ties out­side afford­able seg­ment;

ii. GST shall be levied at effec­tive GST of 1% with­out ITC on afford­able hous­ing prop­er­ties

3. Effec­tive date: 

The new rate shall become applic­a­ble from 1st of April, 2019.

4. 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).

It is under­stood that Area of 90/60 Sqm & 45 Lacs both the con­di­tions to be sat­is­fied to become afford­able hous­ing.

5. 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.

6. 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.

7. Advan­tages of the rec­om­men­da­tions made:

The new tax rate in prin­ci­ple was approved by the Coun­cil tak­ing into con­sid­er­a­tion the fol­low­ing advan­tages:-

  • The buy­er of house gets a fair price and afford­able hous­ing gets very attrac­tive with GST @ 1%.
  • Inter­est of the buyer/consumer gets pro­tect­ed; ITC ben­e­fits not being passed to them shall become a non-issue.
  • Cash flow prob­lem for the sec­tor is addressed by exemp­tion of GST on devel­op­ment rights, long term lease (pre­mi­um), 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.

8. 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/ cir­cu­lars which alone shall have force of law.

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