GST sliced on under-construction properties; Industry expects a 6-7% fall in prices and increasing sales

GST sliced on under-construction properties; Industry expects a 6-7% fall in prices and increasing sales Looking to buy a new house Properties are becoming cheaper from April 1, 2019 with the GST council slashing GST rates for under-construction properties in its 33^rd meeting held on February 24, 2019. New rates on under construction properties The GST rates for affordable under-construction properties has been reduced from 8% to 1%. The GST rates for other under-construction properties (properties costing INR 45 lacs & above) has been reduced to from 12% to 5%. In both the cases, builders will not be able to claim the input tax credit for the services or inputs bought from vendors. New rates will be effective from the next financial year, i.e. April 1, 2019. Meaning of affordable housing category A residential unit will fall under affordable housing category if

• The purchase cost is up to INR 45 lacs, and
• The carpet area is up to 90 sqm (for non-metropolitan cities) and up to 60 sqm (for metropolitan cities).

For this purpose, Metropolitan Cities will include Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of MMR). Experts reckon increase in sales and revenues While builders are worried due to the decline in profitability because of elimination of input tax credit, industry experts are estimating increase in sales and overall revenue. Due to reduced GST rates, the overall cost of property will reduce by 6-7%. It comes as a bonanza for the industry which is bogged down by huge unsold inventory and a long liquidity crisis. No GST on ready-to-shift units if completion certificate is issued If the residential property is ready for occupation and its completion certificate is issued, GST does not apply to the transaction. Hence, buyers should check for completion certificate and ready-to-shift status before buying a house to avoid paying GST and thereby pay a lesser price. GST on renting of property Renting of immovable property is considered as a supply of service under GST laws. However, GST does not apply to renting of property for residential purpose. On the properties rented for commercial purpose, GST will be charged at 18%. Even if a residential property is rented for commercial use, GST will be charged on the transaction. Requirement of registration under GST Landlords will be required to register under GST if the total turnover crosses INR 20 lacs. From April 1, 2019, the threshold limit for registration will be INR 40 lacs. For calculating the INR 20/40 lac limit, landlords will have to add other business or professional income to the rental income. Future expectations of the industry GST rate on inputs such as cement remains in the highest tax bracket, i.e. 28%. Since realtors cannot claim input tax credit on under-construction properties, it will result in increase in cost of building homes. Hence, the industry is expecting government to consider a reduction in the price of inputs to reduce the selling cost of properties substantially. [zombify_post]