Tuesday, March 19, 2024
Advertisement
  1. You Are At:
  2. News
  3. Business
  4. GST Council to clear rules for lower housing rates

GST Council to clear rules for lower housing rates

In the last meeting, the Council slashed tax rates for under-construction flats to 5 per cent and affordable homes to 1 per cent, effective April 1.

IANS Reported by: IANS New Delhi Updated on: March 19, 2019 13:15 IST
Goods and Services Tax Council
Image Source : @WWW.GSTCOUNCIL.GOV.IN

Goods and Services Tax Council logo

The 34th GST Council meeting on Tuesday will consider implementation of lower Goods and Service Tax (GST) rates for real estate sector, sources said.

In the last meeting, the Council slashed tax rates for under-construction flats to 5 per cent and affordable homes to 1 per cent, effective April 1.

The Tuesday meeting that will take place through video conference, will only discuss and approve the transition related issues for the implementation of lower GST rates for the real estate sector.

No other issues related to rates was on the agenda as the Model Code of Conduct for the 2019 Lok Sabha was in force.

The Council was expected to give its nod on new rules on how far builders could make use of credit for taxes paid on raw materials and services in settling their final tax liability as the real estate sector moves to a new tax regime from April 1, sources said.

According to sources, the Council is going to clear rules that unused input tax credit for unbuilt houses have to be reversed as on April 1 .

Unused input tax credit (ITC) on goods and services lying with the property developers as on March 31 will be reversed for underconstruction properties since the ITC stands to lapse from April 1 onwards for such houses.

"This (unused ITC lying in the ledger of the developers) has to be reversed as ITC benefits available to them will lapse from April 1, and can not be passed on to the buyers. 

"From April 1 new rates will apply without ITC where 5 per cent will be charged for and 1 per cent will be the rate for affordable housing," a source said, adding this is the suggestion from the GST Fitment and Law panel, which is currently making the rules.

The reverse would take place through the monthly return file by GSTR-3B, a monthly return required to be filed by all regular taxpayers till March 2019.

In February, GST on under-construction housing properties was cut to 5 per cent, affordable houses to 1 per cent. In both the cases, builders will not be able to claim ITC. 

Properties where the construction has been completed attract stamp duty, not GST. The GST Council has finalised to lower the GST rate on under-construction houses to 5 per cent against 12 per cent and on affordable homes to 1 per cent against 8 per cent to boost housing.

But the real estate companies will oppose the withdrawal of ITC as they opposed the move for reversal of credit saying real benefit of GST will accrue only when impact of higher rates on raw material such as cement, steel and the like is neutralised and at the same time sought that ITC as on April 1 should not be lapsed and return credit be allowed for utilisation with other tax liabilities.

Sources in industry said input tax credit the houses that are sold on a milestone basis. No one collects money at one go. When the developer availed the ITC, the GST rate cuts on under-built houses and affordable houses were not not there. 

When the builder availed and utilised the credit, that time it was taxable. If the house was not sold (means the rate cut was not passed) then the builder did not use the credit. 

There will be no output tax in that case. If the credit has been used in a project from April 1, then government can not demand that credit from any builder. The credit was utilised in the legitimate regime of availability. You can not ask to repay back on retrospectively, they said.

Advertisement

Read all the Breaking News Live on indiatvnews.com and Get Latest English News & Updates from Business

Advertisement
Advertisement
Advertisement
Advertisement