The GST council on Sunday reduces the tax rate of 5% for under construction houses which is a big relief for the home buyers.
The council also cut GST rates on affordable housing to 1 per cent from the current 8 per cent and expanded the scope of affordable housing to those costing up to Rs 45 lakh and measuring 60 sq metre in metros and 90 sq metre in non-metro cities.
The Finance Minister Arun Jaitley said that the new tax rate wi be applicable from 1st April 2019.
Currently, the GST is levied at 12 per cent on payments made for under-construction properties or ready-to-move-in flats where completion certificate has not been issued at the time.
Arun Jaitley said that completed flats but without the completion certificate will also come under the GST regime.
“This (GST reduction) decision will certainly give the boost to construction sector said Jaitley.
The GST Council has also decided to re-define an affordable home. The council has also said that the house/flat of carpet area up to 90 sqm in non-metropolitan cities/towns, and 60 sqm in metropolitan cities having a value up to Rs45 lakh (for both).
Metropolitan cities include Bengaluru, Chennai, Delhi-NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad), Hyderabad, Kolkata and Mumbai the (whole of Mumbai Metropolitan Region). Both the conditions need to be fulfilled for the affordable home tag.
Arun Jaitley also said that to prevent a slip back to the cash system, developers would be encouraged to maximise input purchases from GST-registered dealers.
Chief Managing Director of Knight Frank India Shishir Baijal, said the GST rate-cut, coupled with incentives proposed in the Budget and the repo rate reduction by the RBI, completes the sops for the residential real-estate market. He also added in the statement that the government has taken all steps to create demand and boost sales.