GoM meeting on real estate: Lower rates on residential houses likely. The final proposal needs to be approved by the GST Council.
A ministerial panel headed by Gujarat Deputy Chief Minister Nitin Patel will finalise a report that is expected to give boost to the real estate sector under Goods and Services Tax (GST) by making under-construction residential houses cheaper.
It is learnt that the panel has indicated 5 percent GST on under-construction residential houses and 3 percent tax in case of affordable housing category. However, in both cases, input tax credit (ITC) cannot be claimed.
The Group of Ministers (GoM) for boosting real estate sector under GST regime met earlier during the day at North Block and is in its last stage to finalise the report that will be submitted to the GST Council for its final approval. 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.
However, homebuyers do not have to pay GST if they purchase a ready-to-move-in property after the issue of completion certificate as it is considered as ‘transfer of property’ and comes under state’s jurisdiction of stamp duty. This generally makes under-construction properties costlier for the buyers.
The GoM was formed to look into the issues faced by the real estate sector. Terms of reference included possibility of introducing composition scheme for residential construction unit. The panel also had to examine various aspects of GST rate on transfer of development rights (TDR) and development rights in a joint development agreement and suitable model. Besides, it was expected to look at the legal aspect of inclusion or exclusion of land or any other ingredient, in composition and suggest valuation mechanism.