The GST Council has been slashing tax rates to give relief to consumers despite the impact it has on the exchequer. The discussed rates will be applicable from 1 st April, 2019.
Impact of GST rate:
The government has cut down 7% in both under construction projects and affordable housing properties.
- GST rate for under construction housing property reduced to 5% from existing 12%, without input tax credit.
- GST rate on affordable housing properties reduced to 1% from existing 8%
Input tax credit out of the window:
Builders will not be able to claim input tax credit (ITC) under the new GST rates. Un- utilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing. Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can use to reduce its tax liability when it makes a sale. In other words, businesses can reduce their tax liability by claiming credit to the extent of GST paid on purchases.
Scope of affordable housing:
A residential house/flat of carpet area of up-to 90 sq metres in non-metropolitan cities and outer limit of 60 sq metres in metropolitan cities having value up-to Rs. 45 lacs (both for metropolitan and non-metropolitan cities).
GST exempt for Transfer Development Rights (TDR), Joint Development Agreement (JDA), Long term lease (premium, Floor Space Index (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 as above.
There was no disclosure of any kind of valuation threshold and calculation of carpet area as it varies from project to project.
The reduction in GST can reduce the overall cost of a property by 6% – 7%, depending on the category which would result boom in housing sector.