At present, the Goods and Services Tax (GST) is 12% on payment made for the under-construction property as well as ready-to-move-in flats where completion certificate has not been issued at the time of sale.
According to officials, the GST council is considering to lower the GST to 5 percent from 12 percent on under-construction flats and houses.
However, the properties which are completed and have been issued with completion certificate at the time of sale are GST free. The real estate buyers do not have to pay GST on those properties.
According to reports, the builders are paying inputs for construction in cash and are not passing on benefits to consumers, so that’s one of the reasons to take this action.
The construction material used for construction, which include, capital goods and input services attract 18 percent of GST and the cement attracts 28 percent.
The officials said, “The potential 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.”
However, GST has levied 8 percent in case of affordable housing projects like Pradhan Mantri Awas Yojana, Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, or any other housing schemes of state governments. Moreover, the GST can be adjusted by builders against its ITC.
The officials said, after offsetting ITC, for such affordable housing projects the builder or developer in most cases will not be required to pay GST in cash as the builder would have enough ITC in his books of account to pay the output GST.