New GST rates for real estate: Relief for homebuyers

Narendra Kumar

25 Mar, 2021

Relief for home buyers as GST Council announces rate cut for real estate. This article is describing New GST rates for real estate.

There are two amendments under the new GST rates for real estate sector, announced on Sunday. The first amendment slashes the tax rate on under non-affordable construction housing property to 5 per cent (Current rate 12 per cent) with no input tax credit.

In the second amendment, the council cuts the GST rates on Affordable housing to 1 per cent from the current tax rate of 8 per cent. These amendments of GST tax rates will come into effect from 1 April 2019.

Social Media insight regarding the new GST rates for real Estate

The decision of the amendments under the GST tax rates for real estate is likely to be a relief for the middle-class homebuyers in both metro and non-metro cities. The GST council met briefly through a video conference to arrive at a decision.

A tweet by Sushil Kumar Modi (Deputy chief minister of Bihar)

Read, More: GST Returns to be Filed by Different Taxpayers

A tweet by Arun Jaitley (current Minister of Finance and Corporate Affairs of the Government of India)

Who pays the 12% tax on under-construction housing Property till now?

Till now if you buy a house which is under- construction or ready to move in, without a completion certificate then you are liable to pay 12 per cent of GST on Payments made. However, there is no 12 per cent of tax for the buyer, if they have the certificate of completion at the time of sale.

What comes under affordable Housing?

Affordable housing includes the houses costing up to Rs. 45 lakhs and measuring up to 60 sq metre in metro cities and 90 sq metre in non-metro cities.

List of Metro cities- Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, and Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR)

What will be the effects of the slashed GST rates?

Experts say that once these new amendments come into effect from 1 April 2019, there will be following effects-

• States will suffer revenue losses, valuation of land, and sourcing norms for real estate developers
• Builders will not be able to claim an input tax credit under the new GST rates

What are the Positive Impacts of new GST rates of real estate sector?

Below are the few positive impacts of new GST rates-

• It will give a boost to the construction sector-
• There will be no GST if you have the completion certificate at the time of sale.
• Buyers will be able to have affordable housing rates because of the 1 % GST rates
• The issue of the input tax credit will soon be redundant, as the ITC will be removed and protect the interest of buyers and consumers both
• There will be enough cash flow in the real estate sector because of the exemption of the GST
• Earlier the input tax credit was un-utilized or under-utilized, which was adding to the end cost a consumer end. So this problem will be solved as there will be no input tax credit and better prices in the new GST rates for real estate^[1].
• As per these new amendments, there will be a better tax structure and easy compliance adherence for the builders

As per the press release documents, the details of the GST scheme will be worked upon by the committee of officers and the GST council will further improve the details in the future meetings specifically for this purpose.

Buyers’ complaints regarding the earlier tax rates

Before these new tax rates, there were so many complaints by the buyers in the market-

• The pre-GST tax rate of housing properties was very high, that is buyers were paying 15-18% of tax on the housing properties
• And there were so many complaints against the builders that they were not passing on the benefit of input tax credit to the buyers.

Now the government is planning to have a proper vigilance over these builders. They will keep a check on the private person hired by the state governments. There were cases of these private persons misusing the lowered GST rates for filling their pockets at the cost of states.

Considering the importance of these issues of GST rates, many states such as Delhi, West Bengal, and other states ruled by the opposition Congress is asking for a physical meeting, rather than a video conference.

Read our article:What is Suspension of GST Registration