A ministerial panel headed by Gujarat deputy chief minister Nitin Patel will look into the possibility of rationalisation of GST rate for the real sector besides formulating a composition scheme a preferential scheme under GST extended to consumer centric sectors or industries. The move follows the GST Council meeting on January 10 that referred matters pertaining to the sector to the Group of Ministers due to lack of consensus.
The GoM will now decide on the issue of reducing the current GST levied on real estate which is 12 percent to five percent. Tax experts say that while composition schemes may look attractive, one needs to do a thorough analysis to weigh whether a reduced GST rate of 5 percent without input tax benefit is better than a standard rate of 12 percent with full input tax credit.
At present, 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. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.