Chennai: The Finance Ministry has said GST will not be levied on buyers of real estate properties for which completion certificate is issued at the time of sale.
However, Goods and Services Tax (GST) is applicable on sale of under-construction property or ready to move in flats where completion certificate is not issued at the time of sale, it said.
Know your rates
The Ministry also asked the builders to reduce the prices of properties by passing on the benefit of lower GST rate.
“It is brought to the notice of buyers of constructed property that there is no GST on sale of complex/ building and ready to move in flats where sale takes place after issue of completion certificate by the competent authority,” the Ministry said in a statement.
It further said affordable housing projects like Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of state governments attracts eight per cent GST, which can be adjusted by the builders against its accumulated input tax credit (ITC).
“For such (affordable housing) projects, after offsetting ITC, the builder or developer in most cases will not be required to pay GST in cash as the builder would have enough ITC in his books of account to pay the output GST,” the Ministry said.
It said cost of housing projects or complexes or flats, other than those in affordable segment, would not have gone up due to implementation of GST.
“Builders are also required to pass on the benefits of lower tax burden to the buyers of property by way of reduced prices/ installments, where effective tax rate has been down,” it said.
The move comes even after more than 18 months have gone past Goods and Services Tax (GST) was rolled out.
There is confusion among a majority of homebuyers about how much GST they are required to pay on the different types of homes that are available in the market. There is also confusion about the amount of rebate that a prospective homebuyer is entitled to on the back of the pass-over of ITC.
CREDAI and loans
Faced with liquidity crunch, realtors’ apex body CREDAI sought a one-time restructuring of loans provided to the sector as well as a dedicated fund for the completion of stalled housing projects.
CREDAI, which represents over 12,000 developers through 23 States and 204 city chapters across the country, also demanded reduction in the GST rate for under-construction homes at eight per cent from the current 12 per cent, besides single-window clearance for projects.
These demands were made by the association at it’s second edition of the New India Summit in Mysore, Karnataka. The summit was inaugurated by Union Minister of Skill Development and Entrepreneurship, Ananth Kumar Hegde.
“In view of real estate being subject to both GST and stamp duties, there is a case that the rate of GST on real estate, which stands at 12 per cent, needs to be reduced to eight per cent across all segments and not just for houses of up to 60 square metres,” CREDAI said in a statement.
The current land abatement rate of 33 per cent is also not adequate in case of metros where land costs up to 70 per cent of the total cost of the unit, it added.
CREDAI pointed out that lack of implementation of single window clearance in Indian realty space is a major reason for delay in projects. The fast track approval will resolve critical operational issues in the industry and could also reduce real estate prices substantially.
|On liquidity crunch, Credai had said, “Demonetisation, Real Estate Regulation Act (RERA) and GST have cast the heavy burden of multiple transitions on the real estate sector. The NBFC crisis has resulted in a liquidity crunch for the Indian real estate sector with even loans that have been sanctioned facing difficulties in disbursement.”
“Last mile funding for stalled projects through setting up of ‘Stressed Assets Reconstruction Fund’ for real estate has become a necessity to ensure delivery of housing units to consumers,” CREDAI said.