The GST Council's move to slash the Goods and Services Tax (GST) rates on all under-construction flats effective April 1 and widen the definition of the affordable housing segment has come as a booster shot for the slowdown-hit real estate sector. This means that the builder will charge only 5% GST on under-construction flats (without input tax credit or ITC) as against the earlier 12% along with the ITC, and 1% GST on affordable homes (without the ITC), down from the earlier 8% along with the ITC. While registering a property, the buyer will continue to pay stamp duty as per the ready-reckoner rates.
What has given a push to the industry is the move to redefine the affordable housing segment. Under-construction properties priced up to Rs 45 lakh will now be treated as affordable housing projects and will attract only 1% GST. The carpet area requirements for affordable housing may differ for various projects.
Close to six lakh unsold under-construction houses are awaiting buyers in seven large cities and 34% of which are priced below Rs 40 lakh, according to Anarock, a real estate consultant. Reduction in tax rates can potentially reduce one's purchase cost by 6-7%, and will surely spur buyer interest. The absence of ITC may, however, may continue to keep real estate transactions opaque.