Decisions taken during the 33rd GST Council Meeting
In the last GST Council meeting, it was decided to take some key decisions regarding real estate. To boost the residential segment of the real estate sector, the following recommendations were made by the GST Council in its 33rd meeting held today:
GST Rates for Real Estate
- GST shall be levied at an effective GST rate of 5% without ITC on residential properties outside the affordable segment
- GST shall be levied at an effective GST rate of 1% without ITC on affordable housing properties
- The definition of affordable housing shall be – “A residential house / flat of carpet area of up to 90 square metres in non-metropolitan cities / towns and 60 square metres in metropolitan cities having value up to INR 45 lacs (both for metropolitan and non-metropolitan cities)”
- For the above definition, the metropolitan cities to be considered are – Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR)
- The new rate shall become applicable from 1st of April 2019
GST exemption on TDR / JDA, long term lease (premium) and FSI
Intermediate tax on development right, such as TDR, JDA, lease (premium) and FSI shall be exempted only for such residential property on which GST is payable. Details of the scheme shall be worked out by an officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.
Potential Benefits of the Decisions
The new tax rate in principle was approved by the Council taking into consideration the following advantages:
- Buyers of houses will get a fair price and affordable housing gets very attractive with GST @ 1%
- Interest of the buyers / consumers will get protected, since the issue of ITC benefits not being passed to them shall get solved
- Cash flow problem for the real estate sector will get addressed by exemption of GST on development rights, long term lease (premium), FSI etc.
- Unutilized ITC, which used to become a cost at the end of the project, will get removed and should lead to better pricing
- Last but not the least, the tax structure and tax compliance will become simpler for builders
At the 33rd GST Council meeting, it was decided that the issue of tax rate on lottery needs to be discussed further by the GoM, which have been instituted in this regard.
Stay tuned for further GST Council Meeting Updates right here.