GST rates are applicable for the properties that do not have a completion certificate at the time of sale, be it under construction or ready to move-in properties.
New GST rates will be applicable from April 1, 2019. According to the industry experts, increased demand in the housing sector will be seen post new GST implementation. As pointed out by our Finance Minister, Arun Jaitley, this will allow the homebuyers to buy properties at an affordable price including the middle class, neo-middle class and aspirational class.
Let’s understand how GST rate cut will work, its impact on the real estate industry and the homebuyers.
1. The GST for under-construction flats, that do not fall under the affordable housing segment, has been reduced to 5% without ITC (Input Tax Credit) from 12% with ITC. The GST is reduced to 1% without ITC from 8% with ITC for affordable homes.
2. The cut down in the GST rate is applicable for under-construction properties and ready to move-in flats where the completion certificate is not issued at the time of buying.
3. Earlier there were no valuation limits on properties. Now, with GST rate cuts, it has been redefined with under-construction properties that are priced up to 45 lakhs, which will be considered as affordable housing project and will have 1% of GST without ITC.
4. Although the upper limit for affordable homes range is 45 lakhs for both metro and non-metro projects, the requirement of the carpet area differs. For metro projects, the carpet area is less than 60 sqm and non-metro projects carpet area is less than 90 sqm which falls under the range of 45 lakhs and will be eligible for the 1% GST rate.
5. As per the new definition of affordable housing, one can buy a 2 BHK house in a metro city of 60 sqm and 3 BHK house of 90 sqm in a non-metro city and pay only 1% GST.
These changes in GST rates will help increase sales in homes that fall under the affordable housing category, thereby bringing down the number of unsold inventories. The approved reduction in the levy on homes under construction and raised threshold for affordable housing by the GST Council is certainly a massive relief for both the homebuyers and developers in India.