India: GST on under-construction homes slashed to 5%...! - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Wednesday, February 27, 2019

India: GST on under-construction homes slashed to 5%...!




India: GST on under-construction homes slashed to 5%...!

Levy on affordable houses cut to 1% from 8%; definition of affordable housing changed
In a boost to the housing sector, the Goods and Services (GST) Council on Feb. 24, 2019 decided to recommend lower GST levy on under-construction homes, including in the affordable segment. The new rates will come into effect on April 1, 2019.

Under the new structure, normal under-construction houses will attract GST at 5% against the present effective rate of 12%. Similarly, the levy on affordable homes will be 1% against 8%, now. Both these levies will be without Input Tax Credit.

Also, completed flats but without the completion certificate will come under the GST regime.

“Transition rules need to be drafted carefully. The Law Committee will do that before March 10, 2019 so that it can be approved by the next meeting of the GST Council, which will be through video conferencing,” Finance Minister Mr. Arun Jaitley, who is also the GST Council Chairman, told reporters.

He expressed hope that the lower levy will give a boost to ‘housing for all’.
The GST Council also decided to re-define a affordable home. By the new definition, it will be a house / flat of carpet area up to 90 square meter in non-metropolitan cities / towns, and 60 square meter in metropolitan cities having value up to Rs. 45 lakh (for both).

Metropolitan cities include Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region). Both the conditions need to be fulfilled for the affordable home tag.
Mr. Arun Jaitley said that to prevent a slip back to the cash system, developers would be encouraged to maximise input purchases from GST-registered dealers.

“It could be 80% or more,” he said, adding that the final number would be proposed by a sub-panel of the Council.

Mr. Shishir Baijal, CMD, Knight Frank India, said the GST rate-cut, coupled with incentives proposed in the Budget and the repo rate reduction by the RBI, completes the sops for the residential real-estate market. “...the government has taken all steps to create demand and boost sales,” he said.

However, Mr. Pratik Jain, Partner, PwC India, said that developers would need to raise the base price to recover the loss of input credit.

Also, “it was mentioned that the new rates are likely to come with a condition that majority of purchases would need to be from GST-registered vendors. Therefore, monitoring the compliant vendor ecosystem would be critical for industry,” he said.

India: GST on under-construction homes slashed to 5%...! Reviewed by S. Chitra on February 27, 2019 Rating: 5 India: GST on under-construction homes slashed to 5%...! Levy on affordable houses cut to 1% from 8%; definition of affordable hou...

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