GST Framework for Real Estate Sector Remains Unchanged Amid Ongoing Discussions
The Group of Ministers (GoM) of the GST Council convenes in Goa to review tax structure affecting the real estate sector, focusing on joint development agreements (JDAs) and affordable housing.
GstReal EstateJoint Development AgreementsAffordable HousingTaxationReal Estate NewsSep 25, 2024
The committee, formed in June, aims to suggest a scheme to enhance the real estate sector under the GST regime. However, it has yet to submit any report to the Council. According to reports, several members of the GoM backed the current rate structure for real estate projects under joint development agreements (JDAs) and endorsed that they should remain unchanged.
In JDAs, GST is typically triggered when possession or rights to the property are transferred, usually at the time of handing over completed units to the landowner. For agreements made before March 31, 2019, an 18% GST applied to construction services, allowing developers to claim input tax credit (ITC) on project-related taxes. This ITC mechanism made tax credit recovery more favourable for developers.
However, for JDAs executed on or after April 1, 2019, the GST rates were revised to 1% for affordable housing and 7.5% for non-affordable housing, without the benefit of ITC. This absence of ITC significantly affects overall project costs, leading the real estate sector to seek the restoration of ITC benefits under the new regime.
The GoM also discussed issues related to the taxability of construction services provided by co-operative housing societies to members in new or redevelopment projects. Further deliberation is required after obtaining relevant state data. Additionally, the value limit of INR 45 lakh for defining affordable residential apartments in metropolitan areas was discussed, and the GoM agreed to gather inputs from several states to reach a consensus.
The next GoM meeting is scheduled for October 25, where these matters will continue to be evaluated. In conclusion, the GoM is committed to refining the tax framework for the real estate sector while considering stakeholder inputs, aiming for a balanced approach that supports growth without compromising revenue.
Information
The Goods and Services Tax (GST) Council is a constitutional body that aims to bring about a uniform taxation system in India. The Council is headed by the Union Finance Minister and comprises state finance ministers.
The GST Council is a constitutional body established under the GST Council Act, 2016. The Council is responsible for making recommendations to the Union and state governments on matters related to GST.
A The GoM aims to strike a balance between supporting growth and compromising revenue.
Frequently Asked Questions
What is the current GST rate for real estate projects under joint development agreements (JDAs)?
The current GST rate for real estate projects under JDAs is 18% for agreements made before March 31, 2019, and 1% for affordable housing and 7.5% for non-affordable housing for agreements executed on or after April 1, 2019.
What is the input tax credit (ITC) mechanism, and how does it affect developers?
The ITC mechanism allows developers to claim tax credit on project-related taxes. This mechanism made tax credit recovery more favourable for developers, but it is not available for agreements executed on or after April 1, 2019.
What is the value limit for defining affordable residential apartments in metropolitan areas?
The value limit for defining affordable residential apartments in metropolitan areas is INR 45 lakh.
What is the next step in the discussion on the tax framework for the real estate sector?
The next GoM meeting is scheduled for October 25, where these matters will continue to be evaluated.
What is the aim of the GoM in refining the tax framework for the real estate sector?
The GoM aims to strike a balance between supporting growth and compromising revenue.
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