Council cuts GST rates to 5% for construction sector

The GST Council has recently reduced the GST rate on under-construction houses from 12 percent currently to 5 percent; the new rates will be applicable from April 1, 2019. The Council also cut GST rates on affordable housing to 1 percent from the current 8 percent — less than what the ministerial panel on real estate had suggested. In both cases, the builders will not be eligible to claim input tax credit in the new structure. Healthy competition between property sellers will ensure the rate reduction will slash the cost of under-construction flats in the next financial year, finance Minister Arun Jaitely said, adding that this decision could help achieve the policy objective of 'Housing for all' in the next three years and the move will give a fillip to apartments under construction in the country and improve flow of credit to the real estate sector. Affordable houses in metro cities would be 2 bhk flats, while those in non-metros would be 3 bhk. Commenting on the rate cuts, CMD, Knight Frank India, Shishir Baijal, said that the decision can potentially reduce buyers' payout by 4-6 percent on the overall purchase price, depending on the category. As a matter of fact, the Council adopted a twin definition for 'affordable housing', based on carpet area and cost as in metro cities; affordable house will be defined as a house with carpet area of up to 60 sq.m and priced less than ₹45 lakh. In non-metros, a bigger flat of up to 90 sq.m would be considered affordable housing, with the cost cap unchanged at ₹45 lakh.