The government instructed developers not to bill home buyers for GST since the effectual GST rate on nearly every budget residential project is 8%, which can be accommodated corresponding to the input credit.

Developers have been allowed the alternative to impost GST on buyers of budget home projects given that they lessen the flat prices after assessment of the credit claimed on inputs. The GST, in its latest convention on January 18, had given an extension to the discounted rate of 12% GST for building homes on the lines of the Credit Linked Subsidy Scheme (CLSS) to boost budget housing, which has been accorded the infrastructure status in Budget 2017-18.

The effectual GST rate, nevertheless, reduces to 8 per cent after subtracting a third of the amount applied for the house, flat, with respect to the land cost. This prerequisite has been imposed from January 25.

“All inputs used in and capital goods deployed for construction of flats, houses, etc., attract GST of 18 per cent or 28 per cent. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 per cent. “As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST…,” quoted in a finance ministry statement.

The ministry declared that developers “should not recover any GST payable on the flats from the buyers”. Additionally, it stated that GST can retrieved from buyers as long as developers revise the price of the apartment following the factoring in the complete ITC at hand in the GST governance and lessens the ex-GST rate of apartments.

The concessional rate of 12 per cent GST was already running on homes built in accordance to three segments of the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban).

  1. Original reconstruction of present slums by way of land as a resource element;
  2. Affordable residents in collaboration and
  3. Recipient-headed singular house building/expansion.

In its meeting in January, the Council advanced this tax benefit to CLSS for Economically Weaker Sections (EWS)/Lower Income Group (LIG)/Middle Income Group-1/Middle Income Group-2 (MlG-2) in accordance to the PMAY (Urban) programme.

According to CLSS, subvention is being given on housing loans availed by entitled urban poor (EWS/LIG/ MIG-I/ MIG-II) for procurement and building of house.

The ministry said that now the buyers within the ambit of CLSS would be eligible to interest subsidy in addition to a reduced concessional rate of GST at 8%.

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