Properties with a carpet area of 90 sq. metres in metro cities and 60 sq. metres in non-metro cities will be considered affordable.
The Goods and Services Tax Council on Sunday approved the proposal for lowering the tax rate on real estate projects. For under-construction properties, the GST rate has been cut to 5 per cent from 12 per cent earlier. On the other hand, the tax rate on affordable housing projects will be levied at 1 per cent. However, developers won’t be able to claim input tax credit (ITC), Finance Minister Arun Jaitley said.
Properties costing up to Rs 45 lakh will be considered affordable. Properties with a carpet area of 90 sq. metres in metro cities and 60 sq. metres in non-metro cities will be considered affordable.
“For affordable housing #gst rate reduced from 8 to 1% & for non-affordable from 22 to 5% without ITC. Definition of affordable changed to 90 & 60 sq mtr for non metro & metro with a capping of 45 Lakh for both,”, Bihar Finance Minister Sushil Kumar Modi said.
With respect to issues including transfer of development rights, sale or transfer of Floor Space Index, joint development rights, Jaitley said that the exemption to them from GST was suggested for the sector’s growth. The minister added that the GST Council wants guidelines for the transition to be prepared.
The law and fitment committee will draft the guidelines by March 10 which will be taken up in a subsequent GST Council meeting, Jaitley added.
Earlier last month, the GST Council notified formation of a ministerial panel to study problems in the real estate sector under the indirect tax regime and suggest remedial measures. The panel is headed by Gujarat Deputy Chief Minister Nitin Patel and also have Maharashtra Finance Minister Sudhir Mungantiwar and Karnataka.
In the last meeting, GST Council gave relief to small businesses by hiking GST exemption limit from Rs 20 lakh to Rs 40 lakh and extending the composition scheme to service providers. The new exemption threshold for businesses supplying goods to register under the GST will take effect from April 1, 2019.
The finance ministers of these Opposition-ruled states had expressed concerns about the discussion on lowering tax rate on residential housing citing potential leakages and no assurance of benefits reaching end-buyers.