The 33rd GST council on Tuesday has approved the plan to implement a new tax structure for residential projects, which is considered to provide a big relief to developers.
As per the decision taken by GST council, all the housing projects which are unfinished as on March 31 will have options either to shift to present 5 per cent and 1 per cent rates without ITC or choose the old tax structure with ITC. Revenue Secretary A B Pandey told reporters that developers will get reasonable time for it. Also, he said that the matter would be decided in the next few days after consultation regarding the same with the states.
Soon after the announcement, there has been seen an increase in the shares of the real estate. The highest are the shares of Godrej Properties that closed at Rs 745.90 per scrip, up 5.35 per cent on the NSE followed by Sobha which went up 4.87 per cent to close at Rs 459.95 per share. Indiabulls Real Estate also advanced 3.77 per cent to close at Rs 92.10.
The GST on housing projects, which do not come under the affordable housing section, was reduced to 5 % without ITC from 12 % earlier with ITC.
The GST on under-construction flats, which are not under the affordable housing segment, was reduced to 5 percent without ITC from 12 per cent earlier with ITC. These rates on ongoing projects will be effective from April 1.
According to the Mr. Madhusudhan G, Chairman and MD, Sumadhura Group, "The latest GST announcement certainly favours the developer community by making it flexible - to choose between old GST rates with input tax credit (ITC) or the new reduced GST rate of 5 per cent without ITC. Also, this new tax structure for real estate solves the transition issues on ITC for the ongoing projects and is a big relief for developers."
MS Mani, Senior Director, Deloitte India, said that this is a pragmatic move by the government as segregating under construction projects from new projects would give relief to builders who were worried about the loss of input tax credit.
CREDAI President Jaxay Shah said in a statement, “The period of wait and watch as regards to GST for both the industry and the consumers is now over. We should expect colour to return to the real estate this Holi.”
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