Realtors appeal to the housing ministry to cut GST rate

Apr 17,2019 / By Prahalad Singh / No Comment

Realtors’ appeal for GST rate cutting

In a letter to the GST Council, brokers have requested that real estate agents be released from GST on services provided for affordable housing.

The Association of Certified Realtors of India (ACRI) has appealed to the housing ministry to reduce the 18% goods and services tax (GST) levied on brokers on the brokerage they earn from builders on each transaction and make it 5%.

Reduced GST on brokerage will help them overcome trouble and give better job opportunities to their community in coordination with the GST Council.

Brokers said they were fighting with a slowdown in sales and getting it difficult to sustain as builders refused to pay GST levied on sales.

“No builder is ready to pay GST on the brokerage. The channel partners are already squeezed; this is just an additional burden,” said Irshad Ahmed, president, National Association of Realtors.

The ACRI and the National Association of Realtors had also appealed to the central committee to withdraw the 5% fine on brokers. “The finishing and delivery of projects are not in our hand. We are only a marketing member and reliant on the information was given by the developers and authorities,” said Aggarwal.

The service tax levied on real estate agents’ services was raised to 14% from 12% in June 2015, just before GST was levied on realtors. The GST rate applicable for all services provided under the heading ‘real estate services’ on a fee or commission basis or contract basis and for services by way of renting of a residential home for use as residence is excluded from GST. Other rental aids attract GST at 18%.

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Revised GST rates lead to a drop in housing prices in Rajasthan

Apr 2,2019 / By Prahalad Singh / No Comment

Housing prices in Rajasthan:

The Goods and Service Tax (GST) Council in its 33rd meeting that has been conducted on 24th February 2019 has made a decision to lower the tax burden reducing GST.

Property prices, which had grown exponentially in the state, are expected to fall, as the GST council’s decision of cutting the tax rate on under-construction properties will be implemented from 1st April 2019.

On the under-construction properties, consumers will now have to pay 5% of goods and service tax (GST), as against the existing 12% while on affordable housing to 1% from the current 8%. GST council has also increased the scope of affordable housing to those costing up to Rs 45 lakh and measuring 60 sq-mt in metros and 90 sq-mt in non-metro cities.

Statistics of buying a flat after GST rate slash

In the present condition, if a buyer buys a flat worth Rs.1 crore, he has to pay approximately 18% as a tax, including registry, stamp duty, and GST, which is a huge amount. Now a buyer will have to pay Rs.5L, instead of Rs.12L as GST Tax. This could prove to be a major relief for the homebuyers.

Similarly, a buyer buying a house falling under the affordable housing scheme class will be benefited considerably too. If a flat cost is Rs.20L (under the affordable housing scheme), the buyer will have to pay Rs.20000 instead of existing Rs.36000. As the bracket of affordable housing is increased to Rs.45L in the GST Council meeting, this will also ease middle-income groups.

Homebuyers believe that this move would bring cheer for them and the Rajasthan real estate market which was facing a slowdown. At the same time, it is expected that the market will recover in the months to come.

On the other hand, the developers believe that the lower tax burden on home buyers is expected to drive demand in the affordable segment which, successively, will keep developers engaged in building more affordable homes.

The decision is expected to help the government as well constantly move towards reaching its target of ‘Housing for All 2022′. Furthermore, the move would also inspire developers to construct houses in the government’s scheme, which are not yet getting takers.

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34th GST council meeting highlights.

Mar 25,2019 / By Supriya Mogarala / No Comment

34TH GST Council meeting in INDIA Highlights:

Decisions captured by the GST Council in the 34th meeting held on 19 March 2019 concerning GST rate on Real Estate Sector at New Delhi has discussed the details for implementations of the proposals made by the council in its 33rd meeting for lower efficient GST rate of 1% on affordable houses and 5% on the construction of houses except affordable house. The council has made a decision that the approach of the transformation is as follows:

Option in that respect of ongoing projects:

• The promoters shall be given one time option to pay tax at the previous rates (8% or 12% with ITC) on ongoing projects (projects where the construction and booking have started before 1st April 2019) which have not been finished by 31st March 2019.

• The option shall be operated once within the prescribed time frame and where the option is not regulated within the prescribed time limit, the latest GST rates shall be applied.

New Tax Rates:

New tax rates shall be appropriate to new or ongoing projects which have operated the option to pay tax in the new government are as follows:

New rate of 1% without ITC (input tax credit) on the construction of affordable housing will be available for all houses those who meet the description of affordable houses as determined by the GSTC and affordable houses being established in ongoing projects existing under the central and state housing schemes presently eligible for compromising rate of 8% GST (after 1/3rd land discount)
The new rate of 5% without input tax credit shall be suitable for the construction of all the houses other than affordable houses unless the affordable houses are booked before 1st April 2019. New rates shall be available to pay on installments on or before 1st April 2019. Also, commercial properties in which the carpet area is not more than 15% of the total carpet area of all the properties.

Circumstances for the new tax rates:

The new tax rate of 1% (on affordable housing) and 5% (on other than affordable houses) will be available under the following conditions.

The input tax credit may not be available

80% of input services can be purchased from recognized and registered personalities on the shortfall of purchases from 80%. Tax should be paid by the builder at 18% on RCM basis. However, tax on cement purchased from the unregistered person should be paid at 28% under RCM and RCM under capital goods at applicable rates.

Conversion for ongoing projects electing for the new tax rates:

• Ongoing projects and projects that have not been completed by 31st March 2019 opting for new tax rates shall changeover the ITC according to the prescribed method

• The changeover formula approved by the GST Council for residential projects to deduce the ITC taken for percentage completion of construction as on 1st April 2019 is to arrive at ITC for the entire project and then based on the percentage booking of flats and percentage invoicing the ITC eligibility is the determined transition would thus be on the pro data based on a formula that credit in proportion to the booking of the flat and invoicing done for the booked flat available to subject to a few safeguards.

The following analysis that will be applied to TDR/FSI and Long term lease for those projects those originate after 1st April 2019:

• The supply of long term lease of land by the owner to the developer will be an exempted subject to the condition that the constructed flats are sold before the issuance of completion certificate and tax paid on them. The exemption shall be withdrawn in case of flats that are sold after the issuance of completion certificate, but such withdrawal will be limited to 1% of value in the case of affordable housing and 5% of the value in case of those other than affordable housing. This will achieve fair taxation between the under construction and ready to move property.

• The accountability to pay the tax on TDR, FSI, and long term lease will be shifted from the landowner to the builder under the reverse charge mechanism (RCM)

Modification to ITC Rules:

• ITC rules will be modified to develop the clarity on the monthly and final determination of ITC and reversal theory of Real Estate projects. The change would clarify the procedure for accounting the input tax credit to commercial units that would continue to be eligible for input tax credit in a mixed project.

• The decisions of the GST Council have been presented in the simple language for better understanding and the same would be effective through circulars which alone shall have the force of law.

The progress for the implementation certainly of the new tax structure is acknowledged as it will give enough time to adapt operations to the latest structure. Justifying GST on under construction properties has been one of the Real Estate sector’s foremost requests. The move to reduce GST, combined with the implantation of RERA, will boost the demand and firmly renovate the sector.

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GST Update: New GST Rates For Real Estate

Feb 26,2019 / By Prahalad Singh / No Comment

The Goods and Service Tax (GST) Council in its 33rd meeting has been conducted on Wednesday, 24th February 2019. The discussion on real estate related issues have been discussed and The lower tax burden on home buyers is expected to push demand in the segment which will, in turn, will keep developers committed to building more affordable homes. The decision will provide relief to the middle-class homebuyers in metros as well as non-metro cities. At the same time, the decision is expected to help the govt’s move towards achieving its target of “Housing for All by 2022”.

Demand for residential properties is expected to receive a major boost following GST the government’s decision to reduce the Goods & Service Tax (GST) rates for under-construction projects to 5% from the effective rate of 12%. Keeping in mind the objectives of “Housing for All by 2022”, the government has reduced the GST to marginal 1% for affordable housing. Apart from that, completed projects which have received Occupancy Certificate (OC) will not attract GST.

Rationalization of GST Rate:

Residential Segment Type	Existing Effective GST Rate	New Effective GST Rate	ITC Availability
Residential properties outside affordable segment	12%	5%	Without ITC
Affordable housing properties	8%	1%	Without ITC

3. New Definition of Affordable housing – A residential house/flat of carpet area up to 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having a value up to Rs 45 lacks.

Both conditions will have to be met – house having a carpet area of 50 sq mtr valued at 50 lacs will be taxable at 5% and not 1%.

As per GST Council, Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata, and Mumbai (the whole of MMR).

4. Builders for the above types of residential projects will not be eligible to claim the input credits. As a result, the elimination of Input Credit Tax benefit may hit profitability for the supply side.

5. Transferable Development Rights /Joint Development Agreements / Long term lease premium and FSI(Floor space index) transfers shall be exempted only in case if it pertains to a taxable residential project, in other words, TDR(Transfer of Development Agreements) for commercial projects will be taxable @ 18%

6. Above changes will be effective from 1st April 2019 after notifications are issued

How will the new GST Rate Benefit the Homebuyers?

Now the homebuyers will get a fair price deal. Earlier, the GST Tax rate was 8% for affordable housing properties and 12% for regular housing projects. But in the GST Council Meet that happened on Feb 24, 2019, the GST rate was cut down to 1% for affordable housing projects and 5% for regular housing projects, with no input tax credit.
Affordable Housing plans will get attracted to GST at 1%.
The interest of the homebuyers/consumers towards buying a property has been increased.
Input Tax Credit not being passed on home buyers/consumers will not be an issue.
Un-utilized ITC(Input Tax Credit), which has been used as the cost of the project should be removed and should lead to a better price.
Tax structure and tax compliance should become simpler for builders.

Note:
TDR – Transfer of Development Rights
JDA – Joint Development Agreements
FSI – Floor Space Index
ITC – Input Tax Credit

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Union Budget 2019 Highlights

Feb 1,2019 / By Prahalad Singh / No Comment

Union Budget 2019 brings reason to cheers for Real Estate

TDS threshold on rental income raised from Rs.180000 to Rs.240000
The benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for taxpayers having capital gains up to 2 crore rupees, can be exercised once in a lifetime.
Benefit under Sec 80 (i) BA being extended for one more year, for all housing projects approved till the end of 2019-20.
Income tax relief on Notional Rent from unsold houses extended to 2 years.
Moreover, the GST council will take
steps to reduce the tax burden on home-buyers.
A notional rent is applicable to the second house if someone has more than one house, has been waived off, considering the needs of citizens.

For the common man, industrialist, and farmers

Businesses with less than Rs.5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns.
Individual taxpayers with annual income up to Rs.5L rupees to get a full tax rebate. This will provide tax saving of up to Rs 12,500 for all taxpayers.
2% interest subvention on loan of Rs.1Cr for GST registered MSME (The Micro Small & Medium Enterprises) units.
2% interest subvention to farmers pursuing animal husbandry and fisheries.
Mega pension Yojna, namely Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of Rs.3000 per month, with a contribution of Rs.100 per month, for workers in the organized sector after 60 years of age.
Under Pradhan Mantri Kisan Samman Nidhi, Rs.6000 per year for each farmer, in three installments, to be transferred directly to the farmer’s bank account, for farmers with less than 2 hectares landholding.
Individuals with gross income up to Rs.6.5L will not need to pay any tax if they make an investment in Provident Funds and prescribed equities.
Standard tax deduction for a salaried person raised from Rs.40000 to Rs.50000. A standard deduction of Rs.40000 for the salaried class. This additional deduction was proposed in lieu of existing deductions of Rs 15000 for medical reimbursement and Rs 19200 for transport.

In a relief for the common man, most daily-use items are now under 0-5% tax slab under GST.
Gratuity limit increased from Rs 10 lakh to Rs 30 lakh.
75% of woman beneficiaries under PM MudraYojana, 26 weeks of maternity leave and Pradhan Mantri Matritva Yojana, are all empowering women.
In place of rescheduling of crop loans, all farmers severely affected by severe natural calamities will get 2% interest subvention and additional 3% interest subvention upon timely repayment.
The 22nd AIIMS will be set up in Haryana soon.

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