New Delhi: For those who are looking to buy their house in 2018, here is good news for them. In a bid to promote Government’s affordable housing scheme, the GST Council has recently announced several important recommendations for the housing sector. These changes will come into force with effect from 25 January 2018.
As per the new recommendations, now homebuyers who want to buy their house under the Credit Linked Subsidy Scheme will be entitled to concessional goods and services tax (GST) rate of 8%. Earlier they were charged a GST rate of 12%.
During the meeting, it was finalised to extend the concessional rate of GST on houses constructed / acquired under the Credit Linked Subsidy Scheme for economically weaker section (EWS) / lower income group (LIG) / middle income group-1 (MIG-1) / middle income group-2 (MIG-2) under the Housing for All (Urban) Mission. Thus, any individual whose annual income is up to 18 lakh can avail the benefits of the new GST rate.
Current GST rate
As of now, houses built under CLSS attracted effective GST rate of 18% (GST rate of 12% after deducting value of land). However, the concessional rate of 12 percent was applicable only on houses constructed under Housing for All (Urban) Mission/Pradhan Mantri AwasYojana (Urban), namely (i) Redevelopment of existing slums using land as a resource component; (ii) Affordable housing in partnership with other entities and (iii) Beneficiary-led individual house construction / enhancement.
The exemption has now been recommended for houses acquired under the CLSS component. Therefore, the buyers would be entitled to interest subsidy under the scheme as well to a lower concessional rate of GST of 8%.
How lower rate will attract more buyers
In their latest press release, the GST council quoted, “”It may be recalled that all inputs used in and capital goods deployed for construction of houses attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting value of land).”
As a result of this, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough input tax credits in his books to pay the output GST. Hence the buyers do not have to pay more GST while buying their dream home.
With just few days left in Union Budget, these recommendations are surely a pre-budget cheer for both home buyers as well as the housing sector.