TAXATION OF HOUSING SCHEME UNDER GST W.E.F. 01/04/2019

GST is applicable on the construction cost incurred by the builder and not on the houses already constructed, which only amounts to selling of the building. 

Currently, the Goods and Services Tax (GST) is levied at 12% with Input Tax Credit (ITC) on payments made for under-construction property or ready-to-move-in flats, where the completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is 8%.

However, builders are not passing on the input tax credit (ITC) benefit to consumers. One of the proposals before the Council is to lower the GST rate to 5% for builders who purchase 80% of inputs from registered dealers 
The official said that currently builders are paying for the inputs for construction in cash and are not passing on benefits to consumers and hence, there is a need to bring them to the formal channel. 

With a view to assist India’s real estate sector jump out of a slowdown, the Goods and Services Tax (GST) Council on February 24, 2019 has taken an initiative to cut down the GST rate on under construction houses w.e.f. April 01, 2019 with some other benefits.

 

Following is the analysis of Taxation of House under GST:

 

 

Affordable Housing has been redefined under the GST law with a twin definition to it as follows:

• In case of Metro cities: Flats with a value of up to Rs.45 lakhs with the carpet area of up to 60 sq.m.

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

• In case of Non-metro cities: Flats with a value up to Rs.45 lakhs with the carpet area of up to 90 sq.m.