Bengal leads call for not more than 1% GST for houses costing up to Rs 40 lakh

NEW DELHI: Ahead of the meeting of the GST Council on Sunday, some state finance ministers led by West Bengal have demanded that the tax rate for houses up to Rs 40 lakh should not exceed 1%.

Citing data made available to the council, West Bengal finance minister Amit Mitra has said the actual tax for affordable housing is less than 1% now while the group of ministers has recommended 3% for affordable housing (upto Rs 30 lakh in non-metros and Rs 45 lakh in metros) and 5% for housing other than affordable housing.

“Therefore the suggested rate of 3% by the GoM will actually increase the burden on the small home buyers. This is certainly not desirable,” Mitra has said in a letter to Union finance minister Arun Jaitley. The GST rate (after abatement of 1/3rd value of land) for affordable housing is 8% and allows input tax credit. For other housing it is 12% with input tax credit.

“Housing, other than affordable category, actually has incidence of 5% GST in the medium range and 7% in the premium category, as per the table at page 172 of the agenda notes,” Mitra said. “Our data for West Bengal shows that 70% of the flats/units registered has a cost of Rs 40 lakh. This data provides evidence to the fact that the proposed scheme by the GoM will actually create a large burden for a significant section of home buyers,” he said. He has demanded that for houses above Rs 40 lakh and upto Rs 1 crore, the tax rate should not exceed 5% and for homes above Rs 1 crore the tax should be 7%.

He also called for exempting long term lease of land (more than 30 years) for residential purposes from GST, similar to what has been done for industrial land.