The GST council, on Tuesday, decided that builders who have buildings under construction can be given the option to choose a GST rate with input tax credits (ITC) or a lower GST rate with no tax rebates.
As per the new decision, made over a video conference held by the council, headed by Arun Jaitley, Finance Minister, builders can choose to pay 12% GST with ITC for non-affordable houses or pay 5% GST with no ITC. For affordable housing buildings, the choice can be made between 8% GST with ITC or 1% GST with no ITC.
During the previous meeting held by the GST council, the flat tax rates were revised to 5% for non-affordable projects and 1% for affordable projects. The new tax regime for the real estate sector will come into effect on 1 April 2019.
The GST council’s decision to give builders an option to choose either a higher rate with ITC or a lower rate without ITC addresses the concerns of builders who were worried about losing input tax credits once the new structure was in place.
To choose the higher GST rate with input credits, however, builders will have to get 80% of the raw materials, required for the building, from a registered dealer. Also, the council made it known that for the sake of GST calculation, 15% of commercial space, if any, should be treated as residential property.
A residential property with a carpet area of 90 square metres and 60 square metres in non-metro cities and metro cities respectively that are valued at Rs.45 lakh are considered affordable housing.
The GST council has said that the input tax credit reversal will be done on a proportionate basis and the time limit for the switch into the new tax structure will be intimated after discussion with the states.
Source: Economic Times