In a big relief to builders, the GST Council on Tuesday approved transition rules on new tax rates for residential property and offered an option to builders with under-construction buildings to shift to the new rates without input tax credit (ITC) or continue with the old rates with it.
It was a key demand for the realty industry as a lot of buildings had purchased inputs like raw material and suddenly going out of ITC would have made those projects unviable and would have created a further inventory. Builders also would have been forced to raise prices to make up for losses.
The GST rates for new real estate projects will be mandatory from April 1, 2019.
Currently, the goods and services tax (GST) is levied at 12 percent with ITC on payments made for under-construction property or ready-to-move-in flats where the completion certificate is not issued at the time of sale. For affordable housing units, the existing tax rate is 8 percent.
However, the transition period from old to new rates is yet to be decided by the government.
Niranjan Hiranandani, CMD, Hiranandani Group; Pankaj Bajaj, MD, Eldeco Infrastructure; MS Mani, partner-GST at Deloitte India and Uday Pimprikar, national leader-indirect tax at EY India, discussed whether this decision has put the real estate sector out of its misery once and for all or are there still concerns.