Attention home buyers, if you are on a lookout for a property or about to purchase one, slow down for some time. The Goods and Services Tax (GST) Council is mulling over proposals to cut GST rates in real estate, and if that proposal is cleared, the cost of an under-construction property might go down drastically.
As per the reports, the committee of the GST Council has been working on rationalising the slabs under which commodities are taxed. There are reportedly two proposals that are under consideration to provide a rate cut on under-construction property.
The first proposal is a fixed lowered 12 per cent GST rate with full input tax credit (ITC) to the builder. This will make the effective GST rate to be 8 per cent once the input cost of the land is accounted for and reduced.
There is another proposal going around which states to bring down the GST rate on under-construction flats to 5 per cent, without the benefit of ITC. There is a clause attached here that the builders would have to furnish proof that 80 per cent of the construction material has been purchased from suppliers who are registered with a GST number.
“One of the proposals before the Council is to lower the GST rate to 5 per cent for builders who purchase 80 per cent of inputs from registered dealers,” ET Realty quoted an officer as saying.
As per the GST experts, builders are currently paying for the inputs for construction in cash and are not passing on benefits to consumers and hence, there is a need to bring them to the formal channel. Noteworthy here is that major construction material, capital goods and input services used for the construction of flats and houses attract 18 per cent GST, while cement attracts 28 per cent tax.
As of now, the ready-to-move-in properties with completion certificate are exempt from GST. However, if such a proposal is cleared, the under-construction homes and properties will see a dip in the prices. Since the meeting to clear the proposals is scheduled in January, its benefits are expected to start kicking in before the 2019 Lok Sabha polls. So better wait for some more time.