A government panel on Goods and Services Tax (GST) for the real estate sector is preparing an interim report that may significantly influence affordable housing across India.
The Group of Ministers (GoM) is recommending an increase in the affordable housing price threshold from the current ₹45 lakh to ₹56 lakh per unit. This adjustment would expand the eligibility for the 1% GST rate on affordable housing projects that do not include an Input Tax Credit (ITC), sources reported. The GoM aims to implement this raised limit consistently across all regions in India, making the lower tax rate more accessible to homebuyers nationwide.
The GoM has also addressed the GST applied to land costs within housing projects. Presently, two-thirds of the project cost is attributed to land, with the remaining third allocated to construction. However, the panel is exploring the potential to exclude land costs from GST, applying the tax solely to the construction portion. This revision could mean that the land cost in a housing project would be calculated based on either the circle rate or two-thirds of the total unit cost, depending on which is higher.
These recommendations from the GoM are still preliminary, and a final decision will depend on further analysis, including insights from an upcoming formal report by the Reserve Bank of India (RBI). If accepted, these changes could make homeownership more affordable for buyers across the country.
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