In the 33rd Good Service Tax ( GST ) Council meeting, Arun Jaitley the Union Finance Minister and the state counterparts admitted to bringing the GST rate on under-construction houses in the normal category from luxurious category and bringing it down to, 5 percent GST on real estate from 12 percent.
And GST on affordable flats too will be brought down from current percent to 1 percent.
GST would not be imposed on real estate properties which have been issued the completion certificate at the time of sale.
This new rates would be applicable from 1st of April 2019, this date is been finalized with the government in order to work in detail for making rules and regulation in such a way that a huge number of people would be covered in it mostly who are purchasing the input and capital goods from the business or manufacturer who has been registered under GST.
Houses which will have a carpet area of 650 sq.ft in metropolitan cities and carpet area of 970 sq.ft in non-metropolitan cities would be considered in the affordable category but there is a twist this property would be in this category only if the price of flats up to 45 lakhs.
Mumbai, Delhi NCR ( Delhi, Gurgaon, Ghaziabad, Noida, Greater Noida, Faridabad) ,Kolkata Chennai, Hyderabad and Bengaluru will be considered metropolitan cities.
There is an estimation that there is almost 6 lakh home in the metropolitan city which has the status of under-construction, 32% of these properties are been priced below 42 lakhs.
GST council is also willing to take the decision on a small shop which are under the residential complex to get the tax benefit, mostly this decision would be taken on March 10.
The projects like Rajiv Awas Yojana, Pradhan Mantri Awas Yojana, Jawaharlal Nehru National Urban Renewal Mission, and any other housing scheme of any state government will draw the attention of 5 percent GST on real estate .
Projects like this, after offsetting ITC (input tax credit), Here developers would be not able to pay GST in cash. Now the developer will be having enough ITC in his/her account to pay output on GST.
These Council also decided intermediate tax on Development such as JDA(Joint Development Agreement), TDR (Transfer of Development Rights) and lease which are premium. FSI should be reliving on Residential property which are paying GST. The final detailed report would be presented by the committee in front of the GST council then it would be approved by them.
But why the government is bringing 5 percent GST on real estate on houses under construction ?
The government would be getting more benefits if there was 8% GST on houses
This is because the government wants to boom the real estate business which is been facing downward from the past few years, there are less number of investor from the past few years. The main reason for 5 percent GST on real estate is the cost of houses or properties which are high from the consumers perspective.
Normal consumer or buyers always want the good house but at a reasonable price but the market of real estate is opposite to it. So this initiative by the government is in hope to make Real estate industry more profitable under the GST.
The expert in real estate are relating this decision with government motto which is about Housing for all by 2022.
The deduction in GST tax can will help chase buyers to reduce their payout by 6 to 8 percent. These will lead to an increase in sales which will bring down the number of the unsold inventory and will lead the Real Estate industry toward some growth.
However, there is also the reason for which the government has planned this kind of taxation where they are bringing down the 5 percent GST on real estate. The government wants to reduce the direct cash transaction with the developer who hiding the extra income, they want people to do business within GST act.