Good news for home buyers! Purchasing flats can become cheaper after Jan; here's why

The Goods and Services Tax (GST) Council is reportedly considering to lower down the GST on under-construction flats and houses to 5 per cent in its next meeting.

Currently, a tax of 12 per cent is levied on payments made to buy under-construction property. (Image: Representational/ AFP)

GST rate cut in real estate: Planning to buy a new house in the coming year? Well, the government has some good news for you in the offing. The Goods and Services Tax (GST) Council is reportedly considering to lower down the GST on under-construction flats and houses to 5 per cent in its next meeting which is scheduled to take place next month. Currently, a tax of 12 per cent is levied on payments made to buy under-construction property or ready-to-move-in flats where completion certificate is not issued at the time of sale. GST is not levied on purchase made for flats for which completion certification has been issued during the time of sale. Once the proposal is sanctioned by the GST Council in the meeting, purchasing under-constructed flats would become cheaper. According to a report by India Today, Fitment Committee of the GST Council, which works on aftermaths of revised GST slabs under which commodities are taxed, stated that two proposals are under consideration to provide a rate cut in the sector. With these new proposals, the GST Council will manage to bring down the effective GST rate on under-construction flats to 5 per cent for customers, the report said adding that builders will be forced to promote purchases of construction material from GST-complaint entities. Currently, 18 per cent GST is charged in the real estate sector. However, after proper calculation of various input costs including land prices, the effective rate comes down to 12 per cent. Before implementation of the new tax regime, under-construction housing projects attracted 4.5 per cent service tax and a value-added tax (VAT) of 1-5 per cent depending on the state. Even the inputs used in construction attracted 12.5 per cent excise duty in addition to 12.5-14.5 per cent VAT. Speaking to reporters after the GST Council meeting on Saturday, Finance Minister Arun Jaitley had said that builders can adjust some portion of the 12 per cent GST against the taxes paid on inputs like cement which attract 28 per cent levy.