GST 2.0: If you are planning to buy a house, then this Diwali you can get a big relief because the government is engaged in simplifying the GST structure of the country.
Under the proposal of the central government, the current four slabs of GST – 5 percent, 12 percent, 18 percent and 28 percent will be reduced and divided into two main slabs – 5 and 18 percent. For this, there is a proposal to impose 40 percent GST on luxury and sin goods as well. These changes are expected to be approved in the GST Council meeting to be held in New Delhi on 3-4 September.
Big benefit to real estate sector
Experts believe that the real estate sector will benefit the most from the reform in the GST structure. The price of construction materials like cement, steel, tiles and paint is expected to come down, which can reduce the prices of flats. Currently, 28 percent tax is levied on cement and 18-28 percent tax is levied on steel, tiles and paint. If these are put in the 18 percent slab, then the prices of flats can come down by up to Rs 150 per square feet, that is, up to Rs 1.5 lakh can be saved on a 1,000 square feet apartment.
Current GST Structure for Real Estate
- 5% GST is levied on under-construction flats costing more than Rs 45 lakh.
- 1 percent GST is levied on affordable housing up to Rs 45 lakh.
- There is no GST on ready-to-move flats.
- 28 percent GST is levied on cement, 8 percent on steel, 28 percent on paint and 18 percent on tiles.
What is the matter of Input Tax Credit (ITC)?
From 2019, developers are not allowed to claim ITC on construction materials. This means that GST (18-28 per cent) on construction materials is directly added to the price of the flat. For example, if a 1,000 sq ft flat is priced at Rs 25 lakh, then an additional tax of Rs 5 lakh may be levied due to non-availability of ITC.
Real estate experts believe that this reform can lead to savings of up to Rs 1.5-7.5 lakh, especially the middle class and affordable housing segment will benefit from this because due to reduction in GST on building materials, their prices will come down and building a house will become more affordable than before, which will benefit the middle class.
