Builders can now choose between two tax rate structures in case of under-construction residential projects, the Goods and Services Tax (GST) Council.
The new reduced tax rates will kick in from April 1.The Council, which met through video-conferencing, has given builders the option of choosing between a 12% rate with the option of input tax credit or 5% without it. In the case of affordable housing projects, the choice is between an 8% rate with tax credit and a 1% rate without it.
The option of tax rates in case of under-construction buildings as on April 1 has to be exercised within a specified time, which is expected to be notified shortly. For new projects beginning April 1, the lower tax rates will apply.Before todays meeting, the Council had on February 24 decided to cut the tax rate on under construction residential properties.
How does this impact stakeholders? The approval of the optional scheme for under-construction projects has been a demand of the real estate industry.The go-ahead by the GST Council brings some relief for this sector, specifically in handling transition issues, according to analysts.Tuesdays decisions also offer greater clarity on taxation of under-construction houses, especially those sold during the transition to the new tax system.