NEW DELHI/CHENNAI: If you are planning to buy a house in the affordable segment, better put the deal off till April, since the goods and services tax (GST) you need to pay will drop to just 1% from the current 8% from that month.
The decision to slash the rate was taken by the GST Council on Sunday. It also brought down the GST for under-construction property to 5% from the existing 12%, but nullified the input credit tax for builders, which in most cases was not passed on to the customer.
At present, homebuyers are exempt from GST on projects that have completion certificates. Developers said it had skewed the market, leaving a huge inventory of unsold under-construction property.
The skew was creating problems to raise funds to complete the projects, creating a cascading effect, builders had argued. Sunday’s GST rate cuts have taken that excuse out of the realty segment.
Costing in the housing sector has generally been opaque. S Sridharan, a CREDAI member in Chennai, said: “As the input credit tax developers were enjoying has been removed, they will pass on the cost to the customers. So, the revision in GST rates will not lead to any major reductions in the property prices for consumers.” In simple words, the construction cost could go up.
However, Finance Minister Arun Jaitley said the rate cuts will make housing affordable for middle, neo-middle and aspirational classes.
Input credit tax excuse to jack up construction cost
Since the input credit tax has been brought down to zero, expect developers to jack up the construction cost. Also, since GST on cement stays at 28%, builders will keep cribbing. However, under-construction houses will get a fillip