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.
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 for on Development Rights (Joint Development Agreement), Long Term lease, FSI etc.,
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
(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.)