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.
Related News Articles
Mumbai Real Estate Developer and CEO Embroiled in ₹13.65 Crore Fraud Case
A Mumbai-based real estate developer and CEO have been booked for allegedly forging documents and duping a partner of ₹13.65 crore in a Bhandup land deal.
Mumbai Property Registration Revenue Surges 52% YoY to Rs 1,081 Crore This Diwali
According to data from the Inspector General of Registration (IGR), Maharashtra, property registrations in Mumbai witnessed a remarkable 22% year-over-year increase, with 11,861 homes registered in October 2024, compared to 9,736 in November 2023.
AI Bubble Deflating: Zoho's Sridhar Vembu Stresses Importance of Real Engineering Work
Zoho CEO Sridhar Vembu discusses the potential deflation of the AI bubble and emphasizes the enduring importance of real engineering work in the tech industry.
ED Seizes ₹19.61 Crore from Karrm Developers Linked to Vivek Oberoi in Real Estate Scandal
The Enforcement Directorate (ED) in Mumbai has taken action against Karrm Developers, a real estate firm associated with actor Vivek Oberoi, by seizing assets worth ₹19.61 crore. The action is part of an ongoing investigation into financial misconduct in the affordable housing sector.
Mumbai Sees Record-Breaking Property Registration in March 2025
Mumbai witnessed a surge in property registration in March 2025, driven by the impending hike in reckoner rates set to take effect from April 2025. This surge highlights the robust demand in the city's real estate market.
Private Equity Investments Fuel 133% Surge in Real Estate Deal Volumes in Q1 2025
Real estate deal volumes soared by 133% in the first quarter of 2025, driven predominantly by private equity (PE) investments, which accounted for 88% of the total transactions.