Updates on 33rd GST Council Meeting

   The 33^rdGST Council meeting was held in New Delhi on 24^th February, 2019. The agenda of the meeting was to provide relief to the buyers of the under construction residential properties and have a unified tax rate on lotteries. The council took certain decisions regarding GST tax cut rates for the real estate sector that created a wave of excitement in the field. The real estate sector is the largest contributor of the GDP and also one of the highest employers of the country.The decision will provide a boost to the housing sector and a relief to the home buyers. This is considered to be another big decision concerning real estate sector after RERA. The decision is said to be taken in view of achieving the target of ‘Housing for All by 2022’ where every citizen in India owns a house and the urban areas are free of slums.

 

The GST council in its 33^rdmeeting announced the tax rates from 8% to 1% without Input Tax Credit (ITC) for affordable housing. Affordable housing as defined in the GST law means :

 

• In case of metro cities, flats with a value within Rs. 45 lakhs with a carpet area upto 60 square meters are affordable houses. The metro cities currently include Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (the whole of Mumbai Metropolitan Region).

 

• In case of non-metro cities, Flats with a value within Rs.45 lakhs with a carpet area of upto 90 square meters are affordable houses.

 

The GST rates for non-affordable housing, the tax cut rate is declared from 12% to 5% without ITC.

 

These two important decisions were taken by the council in the meeting but it should be noted that these are the recommendations made by the Group of Ministers (GoM) to the GST Council. These will be drafted properly by the law and fitment committee and then will be presented before the council on or before 10^th of March, 2019. Once these recommendations are passed by the council, then they will be released before the press for the public and will be made applicable from 1^st April, 2019.

 

A GST exemption was also introduced on development rights like Transfer Development Rights (TDR), Joint Development Rights(JDR), Lease (Premium), and FSI. Exemption on these will be given only on the residential flats on which GST is payable.

 

The second agenda of the meeting was regarding the Private Lottery Distribution. Currently, the state run lotteries attract GST rates of 12% on the face value of the lottery ticket. On the other hand, the state authorized privately run lotteries attract 28% of GST.

It was requested by few states that there should be separate GST rates on state run lotteries and privately run lotteries. In contrast, the north-eastern states pleaded to have a unified GST rate on lotteries because in smaller states there is no administrative set up for authorized dealers like that in the bigger state lotteries. The council decided to seek for more discussion in GoM regarding the GST on lottery.

 

The decision will be a major encouragement to both the sellers and the buyers of property.The new tax rate will benefit the house buyer since he has to pay a fair price and affordable housing will be at just 1% GST. The real estate sector has always been troubled by the cash flow problem. This will be addressed by the exemption of GST on development rights, long term premium, etc. At the end of the project, the unutilized ITC used to become cost is now removed and so, it will lead to better pricing of the flats. The builders were most of the times trapped in tax net but now the tax structure and tax compliance has become simpler for them.

 

This was the last GST Council meeting held before the general elections. From next month, code of conduct will be applicable and hence no policy decisions can be announced.