The Goods and Services Tax (GST) Council on February 24 cleared the proposal for lowering the GST rates for real estate. GST payable for under construction properties will be 5 percent for normal housing, Finance Minister Arun Jaitley said. For the affordable housing category, tax at the rate of 1 percent will be levied. However, in both cases, input tax credit (ITC) cannot be claimed.
Properties costing up to Rs 45 lakh will be considered affordable. Similarly, properties with a carpet area up to 60 sqmt for metros and 90 sq mts for non-metros will be considered affordable. The rate cuts will be effective from April 1.
The earlier meeting on the agenda, held on February 20, had remained inconclusive after some state finance ministers sought a physical meeting as they felt an issue as crucial as a special scheme for real estate sector should not be discussed through a video conference.
Currently, GST is levied at an effective rate of 12 percent (standard rate of 18 percent less a deduction of six percent as land value) on premium housing and effective rate of eight percent (concessional rate of 12 percent less a deduction of four percent as land value) on affordable housing 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.
One of the ministerial panels, headed by Gujarat Deputy Chief Minister Nitin Patel, had recommended 5 percent GST on under-construction properties and 3 percent tax in case of affordable housing category. There were three agenda up for discussion during the meeting on February 24. The council discussed tow of them lotteries and real estate.