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PSU MARKET

Government favours zero or 3% GST rate on affordable housing

Staff reporter, New Delhi
09/02/2019   0 Comments

To bring buyers back to the real estate market, a Group of Ministers set up by the GST Council is studying the feasibility of two very bold proposals. The first proposal--and one that states may not favour--is to charge buyers Zero GST on the purchase of a property categorized as affordable housing. The second proposal--and one that in all likelihood will be more acceptable to states--is to levy a 3% GST rate. "The Centre is very keen on Zero GST rate on affordable housing and has been seeking inputs on its financial implications. The states may not agree and will prefer a 3% levy. Either way, there will be a clear definition of affordable housing. It will also reconcile with RBI's so that there is problem in buyers getting home loans," said a government official.

Earlier in Dec 2018, another proposal on the table is to cut the effective 12% GST rate to a flat 5% with no input tax credit for all properties not categorised as affordable housing. Builders are not in favour of this, and have been saying this could actually have an inflationary impact as they will not be able to offset against steel, cement and all other construction material. Builders have requested the GST Council to consider another option, and that is an effective tax rate of 7.2% but with input tax credit. Again, the final call will be that of the GST Council. Either way in an Election Year, the Centre is hoping to get all states on board to announce massive cuts, and provide a much needed booster shot to housing market that has been in the midst of a major downcycle since 2008.

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