The Goods & Services Tax (GST) Council is likely to slash GST on under-construction flats and houses to 5 percent in its upcoming meeting next month, said an official.
As of now, 12 percent GST is levied on payments made on properties under-construction or ready-to-move flats that have not issued the completion certificate at the time of sale.
However, GST is not charged to buyers of real estate properties for which completion certificate has already been issued at the time of sale.
“One of the proposals before the Council is to lower the GST rate to 5 percent for builders who purchase 80 per cent of inputs from registered dealers,” said the official.
The official further added that the builders are currently paying for the inputs for construction through cash and are not sharing the benefits to the consumers. There is a need to put them in the formal channel.
Important construction materials such as capital goods and input services required for construction of flats and houses have been put into 18 percent GST, while cement attracts 28 percent tax.
Before the implementation of GST, under-construction projects were put into 4.5 percent service tax category and a value-added tax (VAT) of 1-5 percent depending on the state.
In addition, inputs required for construction earlier attracted 12.5 percent excise duty and additionally, 12.5-14.5 percent VAT was also charged. Entry tax was also charged on inputs.
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