Recommendations made by the GST Council for the
Housing Sector to promote Affordable Housing for the
masses come into force;
Concessional Rate of GST of 12% extended to
construction of houses constructed/ acquired under the
Credit Linked Subsidy Scheme for EWS, LIG, MIG
sections
Posted On: 07 FEB 2018 1:45PM by PIB Delhi
In its 25th Meeting held on 18th January, 2018, the GST
Council had made several important recommendations for
the Housing Sector which have come into force with
effect from 25th January, 2018. The recommendations are
expected to promote affordable housing for the masses
in the country.
One of the important recommendations made is to extend
the concessional rate of GST of 12% (effective rate of
8% after deducting one third of the amount charged for
the house, flat etc. towards the cost of land or
undivided share of land, as the case may be) in housing
sector to construction of houses constructed/ acquired
under the Credit Linked Subsidy Scheme (CLSS) for
Economically Weaker Sections (EWS) / Lower Income Group
(LIG) / Middle Income Group-1 (MlG-1) / Middle Income
Group-2 (MlG-2) under the Housing for All (Urban)
Mission/Pradhan Mantri AwasYojana (Urban).
Credit Linked Subsidy Scheme (CLSS) is one of the
components of Housing for All (Urban) Mission/Pradhan
Mantri Awas Yojana (PMAY) (Urban). Under this
component, subsidy would be provided on home loans
taken by eligible urban poor (EWS/LIG/ MIG-I/ MIG-II)
for acquisition and construction of house. Credit
linked subsidy would also be available for housing
loans availed for new construction and for addition of
rooms, kitchen, toilet etc, to existing dwellings as
incremental housing. The carpet area of houses
constructed under this component of the mission would
be up to 30 square meters for EWSA, 60 Square Meters
for LIG, 120 sqm for MIG I and 150 Sqm for MIG II. The
benefit of Credit Linked Subsidy Scheme may be taken by
the Economical Weaker sections or Low/Middle Income
Groups for purchase of houses under any project. The
maximum annual income for eligibility of beneficiaries
under the scheme can be up to Rs.18 lakhs. It covers a
very large section of population which aspires to own a
home.
So far, houses acquired under CLSS attracted effective
GST rate of 18% (effective GST rate of 12% after
deducting value of land). The concessional rate of 12%
was applicable only on houses constructed under the
other three components of the Housing for All (Urban)
Mission/Pradhan Mantri AwasYojana (Urban), namely (i)
ln-situ redevelopment of existing slums using land as a
resource component; (ii) Affordable Housing in
partnership and (iii) Beneficiary led individual house
construction/enhancement. The exemption has now been
recommended for houses acquired under the CLSS
component also. Therefore, the buyers would be entitled
to interest subsidy under the Scheme as well to a lower
concessional rate of GST of 8% (effective rate after
deducting value of land).
The GST Council has also recommended that the benefit
of concessional rate of GST of 12% (effective GST rate
of 8% after deducting value of land) applicable to
houses supplied to existing slum dwellers under the
in-situ redevelopment of existing slums using land as a
resource component of PMAY may be extended to houses
purchased by persons other than existing slum dwellers
also. This would make the in-situ redevelopment of
existing slums using land as a resource component of
PMAY more attractive to builders as well as buyers.
The third recommendation of the Council is to include
houses constructed for 'Economically Weaker Section
(EWS)’ under the Affordable Housing in partnership
(PMAY) under the concessional rate of GST of 8%
(effective rate after deducting value of land). This
will support construction of houses up to 30 sqm carpet
area.
The Fourth Recommendation of the Council is to extend
the concessional rate of 12% to services by way of
construction of low cost houses up to a carpet area of
60 sqm in a housing project which has been given
infrastructure status under notification No. 13/06/2009
dated 30th March, 2009. The said notification of
Department of Economic Affairs provides infrastructure
status to Affordable Housing.
Affordable Housing has been defined in the said
notification as a housing project using at least 50% of
the FAR/FSI for dwelling units with carpet area of not
more than 60 sqm. The recommendation of the Council
would extend the concessional rate of 8% GST (after
deducting value of land) to construction of flats/
houses of less than 60 sqm in projects other than the
projects covered by any scheme of the Central or State
Government also.
In addition to the above, in order to provide a fillip
to the housing and construction sector, GST Council has
decided to give exemption to leasing of land by
Government to Governmental Authority or Government
Entity. [Government Entity is defined to mean an
authority or board or any other body including a
society, trust, corporation, (i) set-up by an Act of
Parliament or State Legislature; or (ii) established by
any Government, with 90% or more participation by way
of equity or control, to carry out any function
entrusted by the Central Government, State Government,
UT or a local authority].
Also, any sale/lease/sub-lease of land as a part of the
composite sale of flats has also been exempted from
GST. Therefore, in effect, the Government does not levy
GST on supply of land whether by way of sale or lease
or sub-lease to the buyer of flats and in fact, gives a
deduction on account of the value of land included in
the value of flats and only the value of flat is
subjected to GST.
It may be recalled that all inputs used in and capital
goods deployed for construction of flats, houses, etc
attract GST of 18% or 28%. As against this, most of the
housing projects in the affordable segment in the
country would now attract GST of 8% (after deducting
value of land). As a result, the builder or developer
will not be required to pay GST on the construction
service of flats etc. in cash but would have enough ITC
(input tax credits) in his books to pay the output GST,
in which case, he should not recover any GST payable on
the flats from the buyers. He can recover GST from the
buyers of flats only if he recalibrates the cost of the
flat after factoring in the full ITC available in the
GST regime and reduces the ex-GST price of flats.
The builders/developers are expected to follow the
principles laid down under Section 171 of the GST Act
scrupulously. The above changes have come into force
with effect from 25 January 2018.
PIB
