Goods and Service Tax is like air everywhere it can be discovered as it is charged for every item. It applies to the house regardless of whether you bought it or built it.
Based on the current conditions and situations, distinct steps are taken by the government to benefit both customers and sellers.
Let’s comprehend the information of Goods and Service Tax on the new house.
Following the new schemes being initiated by the government, the demand for housing properties is anticipated to boost.
The government announced a cut in the goods and services tax charged on housing property sales. By speeding up consumption, as it appears to boost the economy.
What are the rates for housing projects covered under Affordable Housing Project?
The Goods and Services Tax Council, which comprises both central and state finance ministers, announced that the new rate will be 5 percent, reduced from 12 percent, on all new housing projects except for those which are covered under affordable housing project. They have also decided to slash the tax rate on affordable housing projects to 1 percent from 8 percent. However, builders will not be able to claim input tax credit (ITC) under the new GST rates.
As per the decision taken by the GST Council, the developers of residential projects which are incomplete as on March 31, 2019, will have the option either to choose the old structure with ITC or to shift to 1% rates, without ITC. Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8% with ITC) on ongoing projects.
Ongoing buildings means where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019. The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects.
Will this be beneficial for constructors?
The reduction in the GST for under-construction projects is the most decisive move that government took. As it will stimulate the demand and sales of under construction properties. The constructors were tensed as the demand for house reduced due to high cost and GST. But this move will fill the necessary gap to increase the demand in under -construction segment, which has been suffering from low sales level from last many quarters.
What does this mean for home buyers?
The decision taken by GST Council will definitely benefit buyers. Especially who made payment under construction-linked payment schemes .
Affordable housing definition after being defined within Rs 45 lakh budget, more properties got covered under this category. The slash in GST rate, coupled with this, increase in the value in definition, will induce more sales . And more homes will fall in this budget range.
Demand for residential properties is expected to receive a boost. As the lower tax burden on home buyers will push up demand in the segment which, in turn, will keep developers committed to build more affordable homes.
And more and more persons will be able to afford their own home with less burden of liabilities which it brings with them.
Affect of new rate on who already bought house?
Let us understand this with an example.
Aakash, assistant manager with a Accounts Forum was among the happy people who bought a house. About 4 months ago, Aakash bought an under-construction apartment in Gurgaon that came under the Haryana government’s affordable housing scheme for ₹21 lakh. He has paid about ₹10 lakh so far, along with GST at the rate of 8%. But after his payment the Goods and Service Tax (GST) Council announced the reduction in GST rates on under-construction houses. After the GST Council slashed the rate on affordable housing projects to 1% from the earlier 8%. Aakash hoped that he could save ₹77,000 on the remaining ₹11 lakh that he has to pay to the developer.
But his happiness, however, was to be short-lived as the GST Council decided to give developers a choice in how to levy GST on properties already under construction which could mean no savings for Aakash .
In a nutshell this could be understood that for those who have already made payment in the under construction scheme before the rate changed may not get benefit.
As because constructor for those contracts has got the option to choose the rate which he wants to implement.