For affordable housings, GST rates on work contracts have been reduced from 18 percent to 12 percent by the government. However, the impact on prices of affordable housing for buyers remains same as earlier, confirmed industry officials that buyers can continue to purchase the finished houses at the predefined GST rate of 12 percent.
A notification issued by the government on Tuesday said that the composite supply of work contracts for affordable housing, which covers an area of 60 sq metre in a project and has been sanctioned by a senior authority, would levy 12% GST, which also includes state GST.
President, Jaxay Shah said that 12 percent GST rate on affordable housing is only for work contractors. If in case a developer involves a work contractor in his project, the developer cost will bring down by 6%. To make projects cost-efficient, developers are preferring to construct projects themselves. However, the cost for developers will remain the same.
Read Also: GST: Impact of New Taxation Structure on Works Contract
Apart from this, from the buyers point of view, as such no changes in GST rates on affordable housing has been made by the government. Buyers will still have to pay 12 percent GST on affordable housings. However, buyers will be entitled to claim input tax credit.
Under the Goods and Services Tax Regime (GST), when a builder sells a house or building to end customer, GST will be calculated at the rate of 18 percent only on two-third of the total house value. The net GST rate thus would become 12% of the total cost of the house. The reduction of one-third of the value of the house is to count for the land price, which doesn’t come in either taxable category.
