Panel May Suggest 5% GST On Under-Construction Homes
A ministerial panel tasked with exploring ways to provide GST relief to the real estate sector may suggest lowering tax on under-construction homes to 5 percent, according to a senior government official.
The goods and services tax rate on under-construction affordable homes may be lowered to 3 percent, the official said. But developers won’t be allowed to claim input tax credit, the official said.
Currently, under-construction properties are taxed at 12 percent, while affordable housing projects attract 8 percent GST and developers are allowed to claim credit on taxes paid on inputs. Ready-to-move-in properties don’t attract GST.
Gujarat Deputy Chief Minister Nitin Patel, the chair of the panel, said the committee will submit its report in two days. The GST Council will then take a final decision.
The GST Council on Jan. 10 suggested setting up the panel to look at ways to ease the burden of real estate sector. The panel’s terms of reference included:
- Studying GST rates and problems the residential segment faces under the new indirect tax regime.
- Suggesting a scheme for the sector like the composition scheme—where taxpayers can pay a flat rate without the option of availing input tax credit.
- Examining GST on development rights and their transfer in joint development.
- Examining legality of inclusion or exclusion of land in the composition scheme and suggest a valuation mechanism. Currently, purchase or sale of land doesn’t attract GST.