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Friday, August 16, 2019

GST on Real Estate: GST Council allows builders to choose between 2 tax rates

1. Real estate sector is one of the largest contributors to our 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 a 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, the following recommendations were made by the GST Council in its 33rd meeting held today:
2. GST rate:
i. GST shall be levied at an effective GST rate of 5% without ITC on residential properties outside the affordable segment;
ii. GST shall be levied at effective GST of 1% without ITC on affordable housing properties.
3. Effective date: The new rate tuned on from 1st of April, 2019.
4. Definition of affordable housing shall be:-
A residential house/flat of carpet area of up to 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value up to 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 (the whole of MMR).
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:-
1. The buyer of the house gets a fair price and affordable housing gets very attractive with GST @ 1%.
2. The interest of the buyer/consumer gets protected; ITC benefits not being passed to them shall become a non-issue.
3. Cash flow problem for the sector is addressed by the exemption of GST on development rights, long term lease (premium), FSI etc.
4. Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing.
5. Tax structure and tax compliance become simpler for builders.
8. GST Council decided that the issue of the 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 the force of law.


New tax structure decided at GST council meeting 19-March 2019


*1.   The council approved the transition plan to implement new tax structure for builders and real state sector from 01-April 2019.

*2.   The new tax rate decided at the meeting are 1% and 5% ( ITC claimed cannot be done).

*3.    New GSR rates decided at the rate of 1% and 5% for affordable and non-affordable respectively.

*4.   These rates of  1% and 5%  will be available only without Input Tax Credit.

*5.   A residential house of carpet area of up to 90 sqm in non-metropolitan cities/town and 60 sqm in metropolitan cities/town having value 45 lakhs or below 45 lakhs has been categories as affordable housing.

*6.   Having the value of flats/construction above 45 lakhs has been categories as non-affordable housing.


*7.    An option will be provided to existing under construction flats or project to shift new rates as decided. (12% existing rates or 1% & 5%  new rates)
gst on real state
gst on real state


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