GST on Affordable Housing [Latest Amendment]
- GST rate till March 2019 on Affordable housing under-construction 8% with Input Tax Credit.
- Recently Government has reduced the GST rates as applicable on the affordable housing for the purpose of to boost the real estate sector and also taking a step forward towards achieving the housing for all target.
- In present scenario provides a complete understanding with regard to the GST applicable to affordable housing.
Meaning of Affordable housing project:
Affordable Housing for metropolitan cities:
Affordable Housing for metropolitan cities with the following conditions are satisfied
- A residential house/flat having carpet area up to 60 sqm.
- The gross amount charged cannot be more than INR 45 Lakhs.
Affordable Housing for non-metropolitan cities:
Affordable Housing for non-metropolitan cities with the following conditions are satisfied
- A residential house/flat having carpet area up to 90 sqm.
- The gross amount charged cannot be more than INR 45 Lakhs.
GST Rates for Affordable Housing [Effective from 01-04-2019]
- As per the new amendment circular with effect from 1st April 2019, the new effective GST rate is 1% (without input tax credit) on the construction of the affordable housing.
- The GST rate of 1% is applicable to all the projects commencing on or after 1st April 2019.
How to get Option for Ongoing Projects?
The projects, wherein, the construction and actual booking both have been started before 1st April 2019 and not been completed by 31st March 2019 has been given an option either to continue with the old GST rate of 8% [with Input Tax Credit] or convert into 1%[without Input Tax Credit].
Conditions to be satisfied for the new GST rate of 1%
The promoters/builder is required to fulfil the following conditions in order to avail the benefit of lower GST rate of 1%:
- Input tax credit (ITC) cannot be availed.
- 80% of the value of the inputs and input services should be purchased from the registered persons. 80% value cap doesn’t include capital goods; service by way of grant of development rights; long term lease of land; FSI; high-speed diesel; natural gas; electricity; motor spirit.
- In the case of a shortfall in the value of 80%, the promoter/builder is required to pay tax @ 18% on reverse charge basis (RCM).
- The promoters/builders are required to purchase cement only from the registered person. In case the cement is purchased from the unregistered person, the promoters/builder is required to pay tax @ 28% on reverse charge basis (RCM).
- The promoters/builders are required to purchase capital goods only from the registered person.
- In case the capital goods are purchased from the unregistered person, the promoters/builder is required to pay tax as applicable on the capital goods on reverse charge basis (RCM).
- In case there is a supply of development rights or supply of FSI against the construction of apartments, the tax shall be paid by the promoters/developers towards the supply of construction service to the landlord.
- The GST tax shall be paid only by debiting the ‘electronic cash ledger’.
Computation of GST on the Purchase of a flat in India:
The GST for affordable housing is less than the GST for housing units that are not affordable.
Let’s examine some samples of the GST computation for Indian apartment purchases.
Computation of GST on affordable property
| Particulars | Rate & Amount |
|---|---|
| The Cost of the Property Per Sq. ft | Rs: 10,000 |
| GST on the Affordable Housing Segment | 1% |
| GST Value Per Sq. Ft | Rs:10 |
| Price Per Sq. Ft after the GST | Rs: 10,010 |
Calculation of GST on Affordable Housing
GST rate on the purchase of affordable housing flats before and after the April 1, 2019, rate change:
| Affordable housing | GST on affordable housing before April 1, 2019 | GST on affordable housing after April 1, 2019 |
|---|---|---|
| Property cost per Sq. Ft | Rs 9,000 | Rs 9,000 |
| GST rate on flat purchase | 8% | 1% |
| GST | Rs 720 | Rs 90 |
| ITC benefit for a material cost of Rs 3,500 at 18% | Rs 630 | Not applicable |
| Total | Rs 10,350 | Rs 9,090 |
