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GST Council Meeting Today; Tax Cut on Residential Properties Likely
Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under-construction property or ready-to-move-in flats.
New Delhi: A Goods and Service Tax (GST) council meeting which will take place on Wednesday is likely to cut GST rates on under-construction residential properties. A ministerial panel set up by the Council will take a final call in this regard. PTI has reported that the GST rate on such properties may be reduced to 5 per cent without input tax credit (ITC) while in the affordable housing segment the GST rate can be slashed to 3 per cent from 8 per cent.
However currently, GST is levied at 12 per cent with an input tax credit (ITC) 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. The effective pre-GST tax incidence on such housing property was 15-18 per cent. (ALSO READ: Tax proposals aimed at helping people living on tight budget: Goyal)
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GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.
There have been complaints that builders are not passing on the ITC benefit to consumers by way of reduction in the price of the property after the rollout of GST, following which the GST Council had set up a ministerial panel to suggest ways to boost realty sector. (ALSO READ: Real estate sector sees budget boosting consumer sentiment)
The eight-member Group of Ministers under Maharashtra Finance Minister Sudhir Mungantiwar favoured hiking GST rate on the state-organised lottery to either 18 per cent or 28 per cent. While the GST rate on state-authorised lottery would be retained at 28 per cent or brought down to 18 per cent.
The other members of the committee are West Bengal Finance Minister Amit Mitra, Kerala Finance Minister Thomas Isaac, Assam Finance Minister Himanta Biswa Sarma, Punjab Finance Minister Manpreet Singh Badal, Goa Panchayat Minister Mauvin Godinho, Karnataka Finance Minister Krishna Byre Gowda, Arunachal Tax and Excise Minister Jarkar Gamlin.
Notably, the then interim finance minister Piyush Goyal in his speech had proposed many incentives to individuals taxpayers that would have a positive impact on the real estate sector, which is facing a multi-year demand slowdown.
On the demand from real estate sector to cut GST rates, Goyal had said, “Our government wants the GST burden on home buyers to be reduced; and accordingly, we have moved the GST Council to appoint a group of ministers to examine and make recommendations in this regard at the earliest”.
At present, GST on under-construction houses is 12 per cent and 8 per cent for affordable homes. There is no GST on completed housing units if the developer has received occupancy certificate.
Goyal had also highlighted that the real estate sector is becoming transparent after the passage of two legislations — the Real Estate (Regulation and Development) Act, 2016 (RERA) and Benami Transaction (Prohibition) Act, 1988.
Section 80-IBA was introduced in 2016 Budget and then amended in the 2017 Budget, by relaxing the condition of the period of completion of the project for claiming a deduction to five years from earlier three years. The size of units should be 30 square metre carpet area in case of municipal limits of four metropolitan cities while for the rest of the country, including in the peripheral areas of metros, limit of 60 square meters applies.
(With PTI inputs)
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