NEW DELHI: The GST Council, in its 34th meeting, has finalised the modalities for transition to the new rates on residential flats, with a flexible option for the builders to choose from. As per the new scheme, developers have the option to apply for either the new GST rates — 1 per cent for affordable under-construction houses and 5 per cent on other houses — or old rates on the ongoing projects, where construction and actual bookings both started before April 1, 2019.
The builders would be given a one-time option to continue to pay tax at the old rates (effective rate of 8 per cent or 12 per cent with input tax credit) on ongoing projects, which have not been completed by March 31, 2019.
For projects starting after April 1, the new rates will be applicable. The council had, in its previous meeting, cut GST rates on affordable houses under construction to 1 percent and on others to 5 per cent, from 8 per cent and 12 per cent earlier.
"Providing choice to realtors to opt for the reduced rates or continue with existing rates with input tax credit for ongoing housing projects shall make compliance easier for them. Further, the clarification on use of upto 15 per cent space for commercial purposes in a mixed project and reversal of tax proportionate to area is welcome as the issues of applicability of reduced tax rates stands resolved,” said Chandrajit Banerjee, director general, CII.
Developers have welcomed the move. “It is beneficial for developers who had already worked out the sale price after factoring in input credits of the project and passed on the benefits to customers,” said Ashok Gupta, CMD, Ajnara India.
Ankur Dhawan, Chief Investment Officer, PropTiger, said there will be more disputes as customers will prefer reduced rates, whereas developers might prefer higher rates with input tax credit.