Recently GST
Council has announced to cut the GST rate from 12% to 5% & 8% to 1% on non
affordable residential property & affordable residential property
respectively. Means Tax is almost 7% lower than the earlier GST on property.
But now customers will not get the benefit of input tax credit (ITC), which was
passed on to the customers.
First of all you
will have to understand the difference between affordable & non affordable
housing, according to government notification a residential house or flat of
carpet area of up to 90 sq.mtr.(approx. 969 sq. ft.) in non-metropolitan cities
and 60 sq.mtr.(646 sq. ft.) in metropolitan cities having value up to Rs.45
lakhs in both metropolitan as well as non-metropolitan cities will be considered
as affordable housing unit.
GST in Real Estate Sector(Brief)
Reduction in GST
can have pros & cons for both industry & property buyers. After this
new GST announcements, property buyers will definitely get the benefits because
of lowering the GST. Earlier hardly any customers were getting the input tax
credit benefits from the builders. So, now property buyers will get some
monetary benefits out because of lower down the GST.
GST milestones in Real Estate Sector
Before GST,
property buyers had to pay 4.5% as service tax on purchase of under
construction properties, now GST is payable at 5 % for non affordable property
which is 0.5% more. And 0.5% will be added to other government levied
taxes/charges like stamp duty, registration charge, VAT, etc. which is
additional economical burden to property buyers.
1% GST on
affordable housing will definitely boost the sector and will encourage the bigger
real estate payers to invest more, which is currently missing in the sector. If
we see the projects across the country we have very limited numbers of
affordable apartments in any given projects. Mostly builders construct only
10-15% affordable apartments in any project to manage financial requirement to
run the project. Currently, affordable housing projects have demand, easily saleable
but lesser profit margins. So builders are least bother to construct affordable
apartments. But after 1% GST on affordable housing will have more demand, so
builders have to construct affordable homes. Affordable housing will sector
will be working economy of scale, so more demand, better sales & more
profits margins.
Actual GST
implementation is all gone in vain. Means from the date of GST implementation
i.e. 1st July 2017 to 31st March 2019, builders put their
hard work, money and time to understand, execute & settle the GST. This
announcement is made end of Feb’2019 and policy will be applicable 1st
April’2019 onward. So again no potential buyers will show interest to buy
property during this period. Further, we have election processes during from
mid March’2019 to end May’2019 and property investors will be very skeptical
about future government & its policy. So, investors will not take interest
in the real estate market.
CONCLUSION: In long run, 1% GST on affordable housing will boost the
real estate sector.
You also need to know the following facts about GST and real
estate (property):
1. No GST is applicable on the sale of ready to move-in flats/buildings where the sale takes place
after issue of completion certificate by the competent authority.
2. GST is applicable on the sale of under
construction properties or ready to move-in flats where completion certificate
has not been issued at the time of sale.
3.
Against the 12% rate under the service tax regime, presently housing societies have to levy GST at 18% on the maintenance charges recovered from its flat owners. The housing society can avail of input credits for the GST paid by it on various supplies received by it–for example, services like security, maintenance of lift and premises, or payment of audit fees, etc.
4. Individual flat owner is required to
pay GST if maintenance is charged by co-operative housing society (CHS) is more
than Rs.7, 500/- per month and the annual turnover of CHS is Rs. 20 lakhs or
more. And such CHS has to register with
its association. This limit has been increased from Rs.5000/- to Rs.7500/-per
month maintenance 25th Jan’2018 onwards.
5. Also smaller CHS with a lower turnover
do not have to register under GST and comply with its various obligations.
Request you to must comment & share. Than You.
Request you to must comment & share. Than You.
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