The interim budget discussed the application of 12% GST for constructed homes and 5% for under-constructed homes. It’s also talked about how it removed all the varied unnecessary taxes and culminated them into one tax i.e. the GST. This helped in increasing the transparency and trust in the real estate market amongst buyer and sellers.
But in recent turn of events, dated February 24, 2019, the Goods and Tax Council, headed by India’s Finance Minister Mr. Arun Jaitley announced the new slashed rates in the GST for real estate market. The act lead to lowering of the GST rate on under-construction properties to 5% from 12%. In addition, affordable housing projects will attract 1% tax. These changes will be applicable from April 2019 and are believed to be a great boost for the real estate market in India.
The council’s decision acted as a breath of fresh air for the real estate market and provided the long await relief. It also expanded the definition of affordable houses for the purpose of GST, which is based on carpet area instead of the common practice of super area whereby builders often allegedly cheat gullible buyers.
Besides being up to ₹45 lakh in value, a property must not exceed 60 square meters carpet area to be eligible for the 1% GST rate under the affordable segment in metro cities, including Metropolitan Region and Delhi-NCR. This criterion will be relaxed to 90 square meters of carpet area for non-metros.
Going by common complaints and research, builders commit tax evasion as they get an input tax credit on building materials such as cement and steel. In order to prevent builders from reverting to cash purchases of inputs, the council will make it mandatory for them to buy a certain percentage of building materials from registered buyers.
This news has really impacted the real estate market in a positive manner and will help to levy a certain burden from the buyers and builders. This will in turn make the dream of affordable homes more real.