The GST Council today (24-Feb-2019) has announced a rate cut in the goods and services tax (GST) charged on sales of residential properties under construction.
As per the latest decision, the new GST rate applicable for all housing projects will be 5%, down from the current 12%.
Whereas, the council also decided to lower the tax rate on affordable housing projects to 1% from 8 %.
However, in both cases, input tax credit (ITC) cannot be claimed.
What are considered as Affordable Housing Properties?
The GST council has also altered the definition of ‘affordable housing’ as below;
- Properties costing up to Rs 45 lakh will be considered as affordable.
- In metro cities, houses with a carpet area up to 60 sq mtr (645 Sq ft) will be classified under affordable housing.
- Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).
- In non-metro cities, houses with a carpet area of up to 90 sq mtr (968 Sq ft) will be classified under affordable housing.
Revised GST Rates on Real Estate Properties & Under Construction Flats
The following revised GST rates on new real-estate projects will be implemented from April 1, 2019. (New Property is the one where the construction begins after 31st March, 2019.)
Latest Update (19-March-2019) :
As per the latest update from the GST council, if a real-estate project has already been under-construction (or) where actual booking has been done before 31st March, 2019 then the builder has been given a one -time option to charge below GST rates;
- On non-affordable properties, a builder can levy old GST rate @ 12% (with Input Tax Credit) or new GST rate @ 5%.
- On affordable projects, a builder can levy old GST rate @ 8% (with ITR) or new revised GST rate @ 1%.
The option has to be exercised once within a prescribed time frame by the real estate builder and where the option is not exercised within the prescribed time limit, new GST rates shall apply.
Do note that the new GST rates are mandatory for Projects which commence on or after 1st April, 2019. The new GST rates are also applicable for on-going projects builders do not exercise their option by 20th May, 2019.
Applicability of GST on Real-estate
The GST Rates will be levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. Kindly note that the GST will not be applicable in Re-sale transactions.
If you buy an under-construction property through Govt provided Credit Linked Savings Scheme then such property is considered as ‘Affordable housing’.
GST is exempted on Development Rights (Joint Development Agreement), Long Term lease, FSI etc.,
GST On Real-estate & Latest Updates :
- Builder can’t charge higher GST for services like PLC (Preferential Location), parking etc. These services should be treated as “composite construction service” and attract the same levy as construction. (Updated on 04-May-2019)
- Builders have to refund GST paid by Home buyers in case he/she cancels the Flat booked in the last fiscal (FY 2018-19). The Real-estate Developer shall be able to avail credit adjustment for such refunds. (Updated on : 08-May-2019)
- Home buyers will have to pay 12 % or 8% GST (the rates as existed prior to April 1, 2019 ) on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019. (Updated on 15-May-2019)
- Flat owners will have to pay GST at 18 per cent if their monthly contribution to resident welfare association (RWA) exceeds Rs 7,500. As per the rules, RWAs are required to collect GST on monthly subscription/contribution charged from its members if such payment is more than Rs 7,500 per flat per month and the annual turnover of RWA by way of supply of services and goods exceeds Rs 20 lakhs. (updated on 23-July-2019)
- In case the charges exceed Rs 7,500 per month per member, the entire amount is taxable. For example, if the maintenance charges are Rs 9,000 per month per member, GST @18 per cent shall be payable on the entire amount of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500.
- If a person who owns two or more flats in the housing society or residential complex, the ceiling of Rs 7500 per month per member shall be applied separately for each residential apartment owned by him.
Continue reading :
- Checklist of Important Property Documents in India | Legal Checklist for Property Purchase
- Occupancy Certificate, Possession Certificate & Completion Certificate – Meaning & Importance
- How to calculate Holding Period & Capital Gains on sale of an Under-Construction property?
- Under Construction House : How to claim tax deduction on Home Loan Interest payments?
- What is GST (Goods & Services Tax) : Details & Benefits
- How Home Buyers can file complaints against Real estate Builders online? | RERA Act
(Post first published on 24-February-2019) (The above provided details are based on the limited available information, if required, this post will be edited/updated.)