The GST Council Tuesday, approved a transition plan for the implementation of a new tax structure for the real property sector with applicable guidelines for housing units being applicable from April 1, 2019.
The Council also determined that beneath construction tasks may have a choice to shift to a new rate. The GST Council, in its thirty-third assembly on February 24, 2019, provided you with new standards for housing devices. GST will be levied at an effective charge of 5% without ITC on residential residences out of doors less expensive phase, at the same time as GST will be levied at a reduced GST of 1% without ITC on cheap housing houses.
A residential residence/flat of carpet region of up to 90 sq. In non-metropolitan cities/towns and 60 sq. In metropolitan towns, having a rice as much as Rs. 45 lakh (both for metropolitan and non-metropolitan cities) has been categorized as low-priced housing. Metropolitan towns are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad, Hyderabad, Kolkata, and Mumbai (the whole of MMR).
The Council, in its meeting nowadays, also held that 80% procurement of substances has to be from a registered dealer. It additionally introduced that up to 15% of industrial space is to be dealt with as residential assets for GST purposes. However, the precise contour of this point mooted by using the Council isn’t very clear.
“With some of the important things for construction consisting of bricks, stone, hardware, and many others. Coming from largely unorganized sectors, assembling the circumstance of eighty percent procurement from registered dealers for concessional GST price could be hard, in particular in Tier-2 and smaller towns,” stated Harpreet Singh, Partner, Indirect Tax, KPMG India.
According to Saloni Roy, Senior Director, Deloitte India, time will inform whether or not the reduced GST charges for below-production properties will give the vital fillip to the real property region that’s presently witnessing adversities. “The concern regarding the reduced fee of 4% and 1% is that it’s miles presented without the ability for builders to take the entire tax credit, which could truly cause an escalation of prices. The GST council assembly nowadays mentioned modalities on transition and made the brand new price mandatory for new production 1 April 2019 onwards,” stated Roy.
The Council also determined that the reversal of the entering tax credit to be achieved on a proportionate basis, and the time limit for the transition to the new system would be mentioned with the states.
“The pragmatic circulate to segregating production tasks from new projects could provide relief to builders who have been involved approximately the lack of input tax credit. This would also permit them to offset the loss of input tax credit inside the new projects. Reversal of Input tax credit on a proportionate basis could entail substantial computational issues for builders as each project could be in various degrees of completion and feature differing pre- and publish of entirety sale patterns. Protecting the current input tax credit and mandating the new charges most effective in respect of recent initiatives might benefit both developers and consumers. The precise assertion on invocation of anti-profiteering provisions if the benefits of lower costs aren’t exceeded by clients seems to signify that the government is eager to guard clients against a GST-led rate boom,” said MS Mani, Partner, Deloitte India.
