Buying flats can become cheaper after January
The Goods and Services Tax (GST) Council is mulling over proposals to cut GST rates on real estate. Sources in the Council said a positive decision in this regard is expected to be taken during the next meeting that will be held in January.
Once the proposals are cleared, buying an under-construction apartment will become cheaper.
Sources in the Fitment Committee of the GST Council, which has been working on rationalising the slabs under which commodities are taxed, said that two proposals are under consideration to provide a rate cut on under-construction flats.
The first proposal is a fixed lowered 12 per cent GST rate with full input tax credit (ITC) to the builder. This will make the effective GST rate to be 8 per cent once the input cost of the land is accounted for and reduced.
The second proposal before the GST Council is to bring down the GST rate on under-construction flats to 5 per cent, without the benefit of ITC. This proposal has a condition that the builders would have to furnish proof that 80 per cent of the construction material has been purchased from suppliers who are registered with a GST number.
With this, the government will manage to bring down the effective GST rate on under-construction flats to 5 per cent for customers, while builders will be forced to promote purchases of construction material from GST-complaint entities.
Currently an 18 per cent GST is charged on the real estate sector. But once the various input costs like price of land are computed, the effective rate comes down to 12 per cent.
The Fitment Committee will be scrutinising the viability and legal aspects involved in this. With the 2019 LokSabha election ahead, the Modi government wants real electoral dividends from the move. The idea is to clear the proposals by the next GST Council meet scheduled in January, so that its benefits start kicking in before the 2019 LokSabha polls.