FAQs on GST for the Real Estate sector

FAQs on GST for the Real Estate Sector

The revenue department has agreed to charge the GST on houses purchased under Credit-Linked Subsidy Scheme (CLSS) of Prime Minister Awas Yojna (PMAY) at the rate applicable upon affordable housing even if the house does not fall under the affordable housing criteria.

The department recently released a list of FAQs (Frequently Asked Questions) on GST for the Real Estate.

Answering a question in the FAQs, the department said the GST on a house of 150 sq metres would be at the rate applicable upon affordable housing, or 1%. So far, the department did not clarify whether the purchase of a house by a beneficiary of CLSS under PMAY would be treated under affordable housing or not.

At the same time, answering a different question on the definition of an affordable house, the department said it should be one with a carpet area up to 60 sq metres in metropolitan cities and 90 sq metres in all other cities or towns.

I am a beneficiary of PMAY-CLSS and the carpet area of my house in a project under construction is 150 sq m. Am I eligible for the new rate of 1%?

You are eligible for the new GST rate of 1%, subject to the condition that the developer-promoter with whom you have booked the house has not exercised the option to pay tax on construction of apartments at the old rate of 8%.

What is an affordable residential apartment?

Affordable residential apartment is one where the project commenced (construction) on or after 01-04-2019, or in an ongoing project in respect of which the promoter has opted for the new rate of 1% (effective from 01-04-2019) having carpet area up to 60 square metres in metropolitan cities and 90 square metres in other cities or towns and the gross amount charged by the builder is not more than Rs 45 lakh for each house.

But if the buyer takes the benefit of CLSS under PMAY, he must GST at the rate of 1% instead of 5% under the new system. In CLSS of PMAY, a buyer can get interest subsidy at the rate of 6.5% on the first Rs 6 lakh of the loan, at the rate of 4% on the first Rs 9 lakh of the loan, and at the rate of 3% on first Rs 12 lakh portion of the loan, depending on his income, which can vary up to Rs 18 lakh per annum.

Under the scheme, there is no cap on the value of a house purchased and the loan amount that a buyer can take from a bank.

On popular demand, the government introduced a new system of GST on residential projects under construction. Under the new system, the GST on affordable projects under construction is 1% without input tax credit (ITC) and 5% without ITC on housing under construction, other than affordable residential apartments.

Source : TOI

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