The option of tax rates in case of under-construction buildings as on April 1 has to be exercised within a specified time, which is expected to be notified shortly. For new projects beginning April 1, the lower tax rates will apply.
Before today’s meeting, the Council had on February 24 decided to cut the tax rate on under-construction residential properties.
How does this impact stakeholders?
The approval of the optional scheme for under-construction projects has been a demand of the real estate industry. The go-ahead by the GST Council brings some relief for this sector, specifically in handling transition issues, according to analysts.
Tuesday’s decisions also offer greater clarity on taxation of under-construction houses, especially those sold during the transition to the new tax system.
While the Council’s decision to cut the GST rate on under-construction and affordable homes is being seen as a positive, analysts are of the view that the decision to end input tax credits (ITCs) could negatively impact developers, which could have a cascading impact on homebuyers.
Arun Singh, Lead Economist, Dun & Bradstreet said: “The GST council has decided to reduce the GST rate on under-construction and affordable homes effective April 1, 2019. However, it would be accompanied by the government’s decision to end input tax credits, which impacts developers. Removal of input tax benefit is likely to hit their margins. The GST Council meeting is expected to clarify the extent to which the opening input-tax credit balance on April 1, 2019 could be used by builders and streamline the other processes of transition.”
Abhishek Jain, Tax Partner, EY India, said: “The approval of the scheme as an optional one for construction projects that are under way, was one of the key demands of the real estate industry. This go-ahead by the GST Council brings relief for this sector in handling transition issues in particular.”
Source: https://indianexpress.com/article/explained/explained-the-new-options-in-real-estate-gst-and-how-it-impacts-you-5634430/
