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Your dream home may become cheaper from next month

Your dream home may become cheaper from next month
Your dream home may become more affordable from next month as Goods and Services Tax (GST) council is considering to lower GST on houses. In a new year bonanza for home buyers, GST council may reduce the GST on under-construction flats and houses to 5 per cent in its meeting next month.

Currently, 12 per cent GST is levied on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.

GST council, in its 31st meeting last week, had announced GST rate cut on 23 items including TV, cinema tickets, video games etc. At the time of announcement, GST Council chairman, Finance Minster Arun Jaitley, had said that the GST Fitment Committee is looking into the matter of GST rate on real estate and the discussion on reduction of tax rate can be made in the next meeting slated next month in January.

“The homebuyers feel they are not getting benefited under GST. Certain proposals have come before the Council and the law and fitment committee will look into the matter and the matter will come up in the next council meeting. There was a total consensus that something needs to be done,” Jaitley had said.

Government feels that builders and property developers are not passing on the input tax credit (ITC) benefit to consumers as the current 12 per cent GST rate gets reduced to around 5-6 per cent if ITC is computed on the amount.

According to Finance Ministry officials, currently builders are making payments for the input items for construction in cash and are not passing on benefits to consumers and hence, government feels that there is a need to bring them to the formal channel.

Major input construction material, capital goods and input services used for construction of flats and houses attract 18 per cent GST, while cement attracts 28 per cent tax.

Prior to GST, under-construction houses attracted 4.5 per cent service tax and a value added tax (VAT) of 1-5 per cent depending on the state. Also inputs used in construction attracted 12.5 per cent excise duty in addition to 12.5-14.5 per cent VAT. Besides, entry tax was also levied on the inputs.
After adjusting for credits on inputs used, the effective per-GST tax incidence on such housing property was 15-18 per cent.

The Finance Ministry has time and again asked real estate dealers to pass on GST rate cut benefits to buyers, but to no avail.

Government is making efforts to rationalise the GST rates. In a blog post, Finance minister Arun Jaitley today hinted that India could go for a single standard GST rate going into the future.

“A future road map could well be to work towards a single standard rate instead of two standard rates of 12% and 18%. It could be a rate at some mid-point between the two,” Jaitley said today.

“The 28 per cent GST slab could be phased out,” Jaitley added.
Source
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Axiom Landbase

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