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Don’t Burden Buyers Of Affordable Housing With GST: Govt To Builders

Don’t Burden Buyers Of Affordable Housing With GST: Govt To Builders

Don’t Burden Buyers Of Affordable Housing With GST: Govt To Builders
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Buyers of affordable housing have a reason to cheer. Time has arrived to make a move for those who have been deferring their property-purchase plans as the GST Council has slashed the tax rate to one per cent on affordable housing projects and five per cent on standard projects with no input tax credit. 

Earlier in Feb 2018, a directive was issued to developers in the country in which the finance ministry has said that they should not recover any GST from homebuyers. Since the effective GST rate on “almost all” affordable housing projects is eight per cent, which could be adjusted against the input credit, buyers should not be burdened with the tax, says the ministry.

The back-story

To meet its Housing-for-All-by-2022 target, the Prime Minister Narendra Modi-led government is pushing the affordable housing segment in a big way. In the Budget 2017-18, the government had awarded an industry status to the affordable housing segment. In Budget 2018-19, the government has announced its plans to set up an affordable housing fund under the National Housing Bank.

It was in January 2018, the GST Council had extended the concessional rate of eight per cent (the actual rate is 12 per cent and the effective rate is eight per cent) GST on houses constructed/acquired under the Credit-Linked Subsidy Scheme (CLSS) for the economically weaker section, the lower-income group, the middle-income group-1 and the middle-income group-2. This provision has effective from January 25, 2018.

Developers could charge the GST from buyers of affordable housing projects only if they reduced the apartment prices after factoring in the credit claimed on inputs, the government said.

"All inputs used in and capital goods deployed for construction of flats, houses, etc., attract the GST of 18 per cent or 28 per cent. As against this, most of the housing projects in the affordable segment in the country would now attract the GST of 8 per cent,” a finance ministry statement said.

"As a result, the builder or developer will not be required to pay the GST on the construction service of flats, etc., in cash but would have enough ITC (input tax credits) in his books to pay the output GST," it added.

With input from Housing News

Last Updated: Mon Feb 25 2019

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