If you are planning to buy a home in 2019, there is good news for you. The Goods and Services Tax (GST) Council is likely to reduce goods and services tax (GST) on real estate. To attract potential home buyers and to revive the Indian residential sector, the Council is planning to bring under-construction and finished flats and houses under the 5% GST slab.
Currently, the GST in real estate is levied at 12% on the sale of those under-construction properties or ready-to-move-in flats where completion certificate have not been issued during the time of sale. However, GST is not applicable to buyers of those properties for which completion certificate has been issued at the time sale.
Once the proposals in this regard are cleared, buying an under-construction property will become cheaper. According to the sources in the Council, said a positive decision can be announced during the January meeting of Goods and Services Tax (GST) Council.
New GST proposals for housing
Presently, the Council is considering two proposals. The first proposal is to maintain a fixed 12 percent GST rate with full input tax credit (ITC) benefit to builders. This proposal will make the effective GST rate 8% once the input cost of the land is accounted for and reduced.
The second proposal is to bring down the GST rate on under-construction flats to 5%, without the input tax credit benefit. Also, it includes one condition that the builders would have to purchase at least 80 percent of the construction materials from those suppliers who are registered with a GST number.
Ever since the GST implemented in the industry, the issue of GST rate on the sale of the flat has become a major one. Some builders are not passing any benefit of input tax credit availed during the purchase of raw material to the buyers of the property.
With the above proposal, the government will be able to manage to reduce the effective GST rate on under-construction flats to 5 percent for home buyers, while builders will have to promote purchases of raw materials from GST-registered suppliers.
Reduction on the GST rate for cement
Speculation is rife that the central government could consider lowering the GST rate for cement and bring it under the 18 percent slab from the current 28 percent rate. This step can certainly boost the demand for under-construction properties among the buyers. Also, it can boost supply deployment which further can help in creating more construction jobs.
Ahead of polls, if the GST council reduces the current rate on under construction housing as well as cement then it will bring a major relief for aspiring home buyers and thus can win the voters sentiments.