The GST Council sought builders can opt for the existing 12% tax rate for homes that are under construction as on 31 March 2019, but will have to pass on the advantages of an input tax credit to customers or choose the new GST rate of 50, effective 1 April 2019.
The GST Council, however, made it clear that for new projects starting 1 April, the 5% and 1% GST rates would apply.
A headline GST of 5 percent, compared to 12 percent previously, is optically much lower. However, this needs to be seen in the context of removal of an input tax credit. Buyers will enjoy savings of three to four percent. The new GST rules have reduced the headline rate to 1 percent from 8 percent (with input tax credit) for affordable housing.
| TYPE OF REAL ESTATE PROJECT | SEGMENT | GST RATE (in effect till 31st March 2019) | GST RATE (in effect from 1st April 2019) | REMARKS |
| Residential Real Estate Project – RREP | Affordable Housing Segment | 8% with Input Tax Credit (ITC) | 1% without ITC | Only Residential Properties @ 1% |
| Residential Real Estate Project – RREP (Commercial unit’s upto 15% area of the total area of the project) | Non – Affordable Housing Segment | 12% with ITC | 5% without ITC | Residential Properties @ 5% Commercial Properties @ 5% |
| Real Estate Project – REP (Commercial unit’s more than 15% area of the total area of the project) | Non – Affordable Housing Segment | 12% with ITC | 12% with ITC (unchanged) | Residential Properties @ 5% Commercial Properties @ 12% (with ITC) |
- AFFORDABLE HOUSING DEFINITION:
- Total carpet area of the residential property cannot exceed 60 square meters in metropolitan areas.
- Total carpet area of residential property cannot exceed 90 square meters in non-metropolitan cities and towns.
- Total value of property cannot exceed Rs. 45 lakh in either metropolitan or non-metropolitan areas.