On its 33rd meeting, the GST council decided to implement new transition plans for GST on real estate household properties. This plan is applicable for builders of under-construction buildings, as they get to choose the GST on real estate between the updated rates without the tax credit or to remain with the previous plan.
At present for GST on real estate, unfinished housing projects are getting higher GST rates on real estate, but with input tax credit benefits. As an advantage, it, in turn, reduced the final GST outcome by compensating the taxes already paid on raw materials.
Back then, the builders were already aware of the GST rate on real estate, as certain projects were at different construction stages. So, developers used to stock up raw materials prior. As a result, according to the present rule, they will now be eligible for ITC benefits. Our PropertyAdviser team always keeps buyers and builders up-to-date with the latest happenings on the real estate sector.
What Is the Impact of GST on the Real Estate Sector?
The GST Council, headed by the Finance Minister Arun Jaitley, announced the new GST on real estate as developers can decide whether they want to pay high-priced rates on raw materials with input tax credits (ITC) or fewer charges for under-construction projects without any added benefits.
In general, the impact of GST on real estate means that the builders can select either they want to pay 12% with ITC benefits for non-affordable houses or 5% for unfinished houses with tax benefits. The council has further decided that for construction projects, 80% of materials like gravel, bricks, hardware, etc. must be procured from certified dealers.
Similarly, for affordable housing developers can pick to pay 1% without tax allowances or 8% including tax benefits. It is said that this new tax plan without input tax credits is being applied to housing projects that launched construction from on or after April 1st, 2019.
Revenue Secretary Ajay Bhushan Pandey said the government will see no revenue loss because of the new GST on real estate initiative for under-construction projects. He said the rates will be calculated by considering certain points like the construction stage of the project, the ratio of commercial to a residential building, invoices, and so on.
This latest news on GST on real estate brought a positive vibe for the builders and buyers. Real estate is something that is always considered as a long-term investment. Hyderabad is one such place that never lets down its investors.