Homebuyers Alert! GST rate cut to drive housing sales, but Assocham also wants another industry to be revived
New GST rate for under-construction properties has been slashed by almost 7% and this will be implemented from April 01, 2019.
A ray of hope has come for prospective homebuyers. They were struggling to buy due to high prices and complicated tax structure in the past. In its 33rd meeting, the GST Council slashed GST rates levied on under-construction residential properties. Talking about the move, BK Goenka, President of Assocham said, "The move had been much anticipated for a while and the industry, as well as the homebuyers would certainly be glad that the move has come at the right time."
New GST rate for under-construction properties has been slashed by almost 7% and this will be implemented from April 01, 2019. The new tax structure now is 5% GST on residential properties outside the affordable housing segment from previous 12%. Further, GST on affordable housing has been cut to 1% from previous 8%. Both the rates will be charged without an Input Tax Credit (ITC). Residential properties on which GST is payable is exempt from Intermediate Tax (TDR, JDA, lease (premium) FSI) on development rights.
Explaining the issues, Goenka said, "For several months now, the industry has been suffering from lower sales in residential units and with the ongoing liquidity crisis, the scenario had worsened for the developers. This move will certainly ease up the pressure, especially in affordable housing segment as many home buyers would be planning to take advantage of the same."
Commenting on the GST rate cuts, Goenka adds, “The latest move from the Government on reducing the GST rates in Real Estate industry is a much-needed relief since the industry has been reeling with lower sales and stalled projects."
According to him, the GST rate cuts of 5% on under-construction and 1% on affordable housing will bring in positive sentiment, especially among the home buyers, who now also have the issue of tax credit transfer out of the way. On the other hand, the developers now would be optimistic at the prospect that the home sales will rise, relieving some the pressure from the unsold units’ pile-up.
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Now that GST cuts have been given on under-construction properties, Goenka believes relaxation in cement industry is also a very big requirement. he believes that cement needs a big boost for revival.
He says, "The GST on cement needs to be reduced to 18% from 28% which is too high. Cement being very important raw material for construction and high taxation without input tax credit will be challenging for the developers.”
With this, Goenka mentions that, the affordable segment will be now a more attractive proposition for new home buyers as the tax being the lowest in the segment, would bring the cost of a house further down making it more reasonable.
This new development comes during a time when policy repo rate has been reduced to 6% and further cuts are being widely expected. Why? Because easing home loan rates would also mean more investment in housing.