GST Council Approves 5% Rate For Under-Construction Properties

With affordable housing now being defined within Rs 45 lakh budget, more properties qualify for this ‘sweet spot category, he said. Puri thinks the GST cut, coupled with this critical change in definition, will induce more sales in homes falling in this budget range, which could be a “win-win” for builder and buyers.

The state-run lotteries directly run by the state are levied with a GST of 12 percent, currently. The state-authorised lotteries run by the state's agents have a GST of 28 percent.

The north-east states demanded a review of these rates, Jaitley said. The smaller north-eastern states did not have the infrastructure and felt they were being “eliminated in the competitive market through the differential rates”, he added.

A Group of Ministers headed by Maharshtra Minister of Finance & Planning Sudhir Mungantiwar recommended that there needs to be a single rate, which may be 18 or 28 percent.

The issue was discussed today, and members from Kerala and Punjab, who could not attend the meeting today wish to reconvene this meeting at a later date, Jaitley said. There will be another meeting to discuss the issue and reach a possible consensus.

Finance Minister Arun Jaitley said that the GST council agreed to lower GST for affordable housing to 1 percent. This move will give a “boom” to the real estate sector, and make housing affordable for middle-class, neo-middle class and aspirational class.

‘Affordable housing’ in Bengaluru, Chennai, Delhi NCR, Hyderabad,Kolkata, Mumbai MMR region will have a carpet area up to 60 sq metres and will be priced up to Rs 45 lakh. In non-metro cities, criteria for affordable housing will be defined based on carpet area of up to 90 sq. metres and cost up to Rs 45 lakhs, he added. “We expanded the definition of affordable housing so that aspiring people can buy better houses.” This decision will give good boost to apartments under construction, lead to credit flow for real estate sector, he said.

The move is set to be implemented from April 1, 2019.

On other issues in real estate like the transfer of development rights, joint development rights, lease premiums, sale or transfer of Floor Space Index, Jaitley said there was a suggestion to exempt this from GST to give a boost to the sector. On that, the GST Council wants rules and guidelines for transition to be prepared. The fitment and law committee will draft those guidelines by March 10. Then the recommendations will be put in front of a subsequent GST Council meeting, Jaitley added.

For affordable housing #gst rate reduced from 8 to 1 % & for non affordable from 22 to 5 % without ITC.Definition of affordable changed to 90 & 60 sq mtr for non metro & metro with a capping of 45 Lakh for both.

— Sushil Kumar Modi (@SushilModi) February 24, 2019

The Goods and Services Tax Council has approved lowering the tax rate on under-construction properties to 5 percent, from 12 percent earlier. Affordable housing projects will attract 1 percent tax. The definition of what constitutes affordable housing has been changed. However, developers won’t be allowed to claim input tax credit.

The Union Minister of Finance & Corporate Affairs, Shri @arunjaitley chairing the 33rd GST Council Meeting which began in national capital short while ago.The Meeting is being attended by the Finance Ministers of different States and the Union Territories: pic.twitter.com/VoEmQadZE3

— Ministry of Finance (@FinMinIndia) February 24, 2019

A ministerial panel had proposed bringing down GST on under-construction properties to 5 percent from 12 percent. The group of ministers, headed by Gujarat Deputy Chief Minister Nitin Patel, had also suggested lowering the tax rates on affordable homes. But developers won’t be allowed to claim input tax credit.

The panel also has Maharashtra Finance Minister Sudhir Mungantiwar and Karnataka Finance Minister Krishna Byre Gowda as its members, according to a statement by Ministry of Finance. Other members include the finance ministers of Kerala, Punjab and Uttar Pradesh—TM Thomas Isaac, Manpreet Singh Badal and Rajesh Agarwal, respectively—and Goa Panchayat Minister Mauvin Godinho.

A group of ministers had suggested having a uniform rate of 18 percent or 28 percent for both state-run and state-authorised lotteries. Currently, the state-organised lottery attracts 12 percent GST, while a tax rate of 28 percent is levied on state-authorised lotteries.

However, Kerala Finance Minister Thomas Isaac voiced his disagreement over the amendment to the GST on lottery and had said that the decision on important issue of GST on lottery cannot taken without a fair discussion. He had told PTI that henceforth he will not attend any council meetings till the elections were over.

A rate cut on cement, which remains in the highest tax slab, was also expected to be discussed in the Feb. 20 meeting.

The GST Council had extended the deadline for businesses to file sales returns for January till Feb. 22. The last day for filing GSTR-3B returns was Feb 20. Due to disturbance in Jammu and Kashmir, Jaitley said the council decided to extend the last date for filing GSTR-3B returns in the state to Feb. 28.

The Council also didn’t take any decision on having a unified tax rate for lotteries.

The Goods and Service Tax Council met today to further tweak the indirect tax system, with all eyes on announcements for the real estate sector. The meeting was chaired by Finance Minister Arun Jaitley who had adjourned the Feb. 20 meeting in Delhi after some states had expressed apprehensions over making rate decisions for the real estate over video conferencing.