Chennai: The Goods and Service Tax Council approved the transition plan to move towards new tax rates for the real estate sector by giving builders an option to levy the old tax rate if they want.
Choosing the old tax rates for projects, construction for which was started before 31 March, will help builders to avail their accumulated input tax credit.
New projects starting from 1 April will have the new tax rates of one per cent for affordable housing projects, and five per cent for other housing projects without the benefit of input tax credit.
Builders who opt for new GST rates for under-construction properties will have to proportionately reverse credit for inputs that they would have availed.
The formula for reversing the credit has been derived from calculations using percentage of construction completed, invoices issued, ratio of commercial to residential housing, among others.
For a project with both commercial and residential spaces, developers will be allowed to claim input tax credit for ongoing projects, proportional to carpet area of the commercial space to the total carpet area of the project.
GST on commercial realty is levied at 12 per cent with the facility to avail input tax. The GST Council did not reduce tax rates for commercial properties.