Bhubaneswar: Government of India on Monday reduced the Good and Services Tax (GST) for under-construction projects from 12 per cent to 5 per cent. In a major push to its objective of ‘Housing For All By 2022’, the government has reduced GST to marginal 1 per cent for affordable housing while revising the definition of such homes.
Union Finance Minister Arun Jaitley said that the relief provided to the real estate sector will boost housing for all and fulfil the aspirations of the neo/middle classes.
Prior to this, under-construction residential properties attracted a rate of 18 per cent and effective rate of 12 per cent after factoring one-third abatement for the value of land. The effective GST rate for affordable housing was 8 per cent. Ready properties that have received occupancy certificate (OC) do not attract GST.
Input Tax credit benefit has been completely eliminated, but this move will solely benefit the supply side. However, the potential demand generation as a result of this move will far outweigh any negative aspects leading to greater sales numbers and revenues.
According to experts, the reduction in GST rates with an expanded definition of affordable housing, coupled with incentives proposed in the budget and the reduction prime lending rates by the Reserve Bank of India, supports the sops for the residential real estate market. The much-awaited reduction in GST has prompted homebuyers to defer their decision for the last two months.
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