To defibrillate a slow residential property market, India has cut its Goods and Service Tax (GST) rate on under-construction residential projects and affordable housing.
The GST Council slashed Sunday the tax rate on under-construction flats from 12 percent to five percent, while the levy on affordable housing was reduced from eight percent to one percent.
The new rates will take effect on 1 April.
The Indian government hopes the new measures would further incentivise property seekers to acquire homes and, in the long run, move the country toward its ‘Housing for 2022’ goals.
The council also scrapped the input tax credit (ITC), long seen as a burden on consumers who lament that the benefits of the tax relief were not being passed on by developers to them.
After the removal of the ITC, builders will need to purchase a “very high percentage” of their inputs from registered dealers, announced finance minister Arun Jaitley.
The definition of affordable housing will also change according to carpet area and cost come April, Jaitley added. In metro cities, an INR45-lakh apartment with a 60-square-metre carpet area will fall under affordable housing. A unit at the same price with a 90-square-metre carpet area will qualify as such in other cities.
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