The Council will decide on lowering GST for under-construction houses from 12% to 5% and for affordable housing from 8% to 3%
The Goods and Services Tax (GST) Council is likely to decide on lowering tax rates on real estate in its meeting scheduled today.
The Council meeting, to be chaired by finance minister Arun Jaitley through video conference, will decide on lowering GST for under-construction houses from 12% to 5% and for affordable housing from 8% to 3%. Meanwhile, the benefit of the input tax credit (ITC) available to the builders is set to be withdrawn. This is likely to bring relief to homebuyers as the benefits are not being passed on to them.
Currently, premium housing attracts 12% GST while an effective rate of 8% is applicable on the affordable housing segment for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. The GST, however, is not levied on the properties where the completion certificate has been issued.
A proposal by the Group of Ministers (GoM) will be discussed in the Council meeting. The GoM under Gujarat deputy chief minister Nitin Patel has come out with recommendations on the real estate sector in which it has favoured slashing the rates on the under-construction properties to 5%. For affordable under-construction housing segment, the GST is likely to be lowered to 3% from 8% at present. However, in both the cases, the builders can't claim the benefit of ITC, as per the report.
There have been complaints filed with the National Anti-Profiteering Authority (NAA) that the builders have not been passing the GST benefit of the ITC to the homebuyers.
This is likely to give a boost to the under-construction housing segment which has not been attracting customers as such properties had become costlier as compared to finished ones that didn't attract GST, said experts.
"If the GST rate is brought down to 5% from 12%, it will be good for homebuyers as well as builders. It will also be simpler to calculate the tax without ITC," said Anuj Puri, chairman of Anarock Property Consultants.
Apart from real estate, the Council is also likely to discuss the levy of tax on lotteries. While the ministerial panel set up to review the tax rate on lottery favoured a uniform GST rate, there was no consensus among the members on the rates - whether it should be 18% or 28%. A final call would be taken at the meeting. The state-run lottery is taxed at 12%, lower than the state-authorised private lottery which attracts 28% GST. The ministerial panel under Maharashtra finance minister Sudhir Mungantiwar had met on Monday to examine the two tax rate regimes and whether the current differential rates should continue or there should be a uniform tax rate on lotteries.
...& ANALYSIS
- The Council will decide on lowering GST for under-construction houses from 12% to 5% and for affordable housing from 8% to 3%
- Benefit of input tax credit available to the builders is set to be withdrawn. This is likely bring relief to homebuyers
- The Council is also likely to discuss levy of tax on lotteries
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