GST Council to Consider 5% GST on Under-Construction Homes

GST Council to consider 5% GST on under-construction homes

The GST Council is slated to meet on January 10 to discuss lowering GST on under-construction flats and houses to 5%, as well as hiking exemption threshold for small and medium enterprises.

The council, in its previous meeting on December 22, 2018, had rationalised the 28% tax slab and reduced rates on 23 goods and services. This would be the 32nd meeting of the council, which is chaired by Finance Minister Arun Jaitley and comprises his state counterparts.

Briefing reporters after the recent council meeting, Mr. Jaitley had said that the next meeting would consider rationalisation of tax rates on residential properties and raising the threshold limit for MSMEs from the current 20 Lakh. Also, the council would consider a composition scheme for small suppliers, apart from discussing levying a calamity cess as well as GST rates on the lottery.

The GST Council is likely to consider lowering GST on under-construction flats and houses to 5%, an official said. Currently, the Goods and Services Tax (GST) is levied at 12% on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.

However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.  An official said that this 12% GST rate ideally would have been partially offset by way of taxes paid on inputs by builders and hence the actual incidence of GST on under-construction home buyers would have been around 5-6%. However, builders are not passing on the input tax credit (ITC) benefit to consumers.

“One of the proposals before the council is to lower the GST rate to 5% for builders who purchase 80% of inputs from registered dealers,” an official said. Also the report of group of ministers looking into the concerns of MSMEs under the GST regime would be taken up for consideration.

Currently, businesses with a turnover of up to 20 lakh are exempted from GST. The Council could consider hiking the threshold to 75 lakh for only MSMEs.

“An in-principle unanimous decision was taken that a composition scheme be framed for small service providers. The threshold and composition charge would be decided in the next meeting,” Mr. Jaitley had said on December 22.


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