To promote affordable housing for the masses in the country the GST Council has recommended Concessional Rate of GST of 12% extended to construction of houses constructed/ acquired under the Credit Linked Subsidy Scheme for EWS, LIG, MIG sections.
One of the important recommendations made is to extend the concessional rate of GST of 12% (effective rate of 8% after deducting one third of the amount charged for the house, flat etc. towards the cost of land or undivided share of land, as the case may be) in housing sector to construction of houses constructed/ acquired under the Credit Linked Subsidy Scheme (CLSS) for Economically Weaker Sections (EWS) / Lower Income Group (LIG) / Middle Income Group-1 (MlG-1) / Middle Income Group-2 (MlG-2) under the Housing for All (Urban) Mission/Pradhan Mantri AwasYojana (Urban).
So far, houses acquired under CLSS attracted effective GST rate of 18% (effective GST rate of 12% after deducting value of land). The concessional rate of 12% was applicable only on houses constructed under the other three components of the Housing for All (Urban) Mission/Pradhan Mantri AwasYojana (Urban), namely (i) ln-situ redevelopment of existing slums using land as a resource component; (ii) Affordable Housing in partnership and (iii) Beneficiary led individual house construction/enhancement. The exemption has now been recommended for houses acquired under the CLSS component also. Therefore, the buyers would be entitled to interest subsidy under the Scheme as well to a lower concessional rate of GST of 8% (effective rate after deducting value of land).
In addition to the above, in order to provide a fillip to the housing and construction sector, GST Council has decided to give exemption to leasing of land by Government to Governmental Authority or Government Entity. [Government Entity is defined to mean an authority or board or any other body including a society, trust, corporation, (i) set-up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted by the Central Government, State Government, UT or a local authority].
Also, any sale/lease/sub-lease of land as a part of the composite sale of flats has also been exempted from GST. Therefore, in effect, the Government does not levy GST on supply of land whether by way of sale or lease or sub-lease to the buyer of flats and in fact, gives a deduction on account of the value of land included in the value of flats and only the value of flat is subjected to GST.
It may be recalled that all inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18% or 28%. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8% (after deducting value of land). As a result, the builder or developer will not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC (input tax credits) in his books to pay the output GST, in which case, he should not recover any GST payable on the flats from the buyers. He can recover GST from the buyers of flats only if he recalibrates the cost of the flat after factoring in the full ITC available in the GST regime and reduces the ex-GST price of flats.
The builders/developers are expected to follow the principles laid down under Section 171 of the GST Act scrupulously. The above changes have come into force with effect from 25 January 2018.
Concessional Rate of #GST of 12% extended to construction of houses constructed/ acquired under the Credit Linked Subsidy Scheme for EWS, LIG, MIG sections: https://t.co/2oQhc5miS4
— PIB India (@PIB_India) February 7, 2018
