In Win for Home-Buyers, Centre Cuts Tax on New Houses Ahead of Polls

NDTV By Divyanshu Dutta Roy February 24, 2019 22:21 IST

The GST Council also decided to lower the tax rate on affordable housing projects to 1 per cent from 8 per cent.

House built on an area of 60 square metres will now be categorised as affordable housing.

NEW DELHI: The centre has announced major cuts in the Goods and Services Tax charged on the sale of under construction residential properties - a move that's certain to find favour with middle class voters ahead of the coming elections. Tax on affordable housing - an area of 60 square meters and below in urban metropolitan areas having value upto Rs. 45 lakh - is down from 8 per cent to 1 per cent. For anything above that, the tax is down from 12 per cent to 5 per cent, the finance ministry said.

The slab on what's considered affordable housing has also been revised - for non-urban areas. From 60 square meters, the cap has been raised to 90 square meters.

The new rules will apply from April 1.

"This will give boost to housing for all," Union Finance Minister Arun Jaitley tweeted after a meeting of the Goods and Services Tax Council, comprising state and federal finance ministers, this evening.

The revisions came under the "Housing for All by 2022" vision of the government that sees every citizen having a house and urban areas free from slums.

The BJP has faced an electoral setback in the recent assembly elections in the three heartland states, considered the semi-final before the national elections. The opposition claims that government's failure on farm sector reforms and creation of jobs, and the imperfect implementation of GST has led to the rejection from the voters.

Prime Minister Narendra Modi's BJP has been trying to stimulate the economy before the general elections due by May and the boost for the real-estate sector is part of it. There has also been considerable tax relief - both for the salaried middle class and small and medium enterprises - in the interim budget announced earlier this month.

The government announced a change in national sales tax rules that would exempt about 20 lakh small businesses from tax payment. Income tax for those earning up to Rs. 5 lakh too was scrapped.

The real estate sector in parts of the country has been in torpor. In and around the capital New Delhi, for example, there are many half-completed properties. Home buyers put deposits down on many of the apartments only to see the developers fail or, in some cases, commit fraud.

The GST council, the statement from the finance ministry said, specified that builders, who utilize the lower rates will not be able to get a refund of input tax. Home buyers have complained that builders were not passing on the benefits from the refunds of input tax credit to them.

Input tax is essentially credit received by the builders on payment of taxes on building materials such as cement. "This decision ahead of the elections could provide some relief to home buyers," said Abhishek Kumar, president of a homebuyers association.

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