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GST Council approves transition plan for new tax rates for real estate sector

Published on March 19, 2019

Rajesh Goyal, MD, RG Group & Vice president, CREDAI NCR

Latest decision is a good step to solve the transition issue that developers were facing. Most of the developers have already bought the raw material for projects launched before April 1, 2019, and they were in confusion regarding the GST charges to the buyer. Now, developers can take a sigh of relief as they will go for old GST rates with ITC to charge 8 and 12 per cent GST to the buyer. We are now looking at improved market as for newer projects the rates will be 5 per cent and 1 per cent. This would mean more number of people will try to buy homes now.

Mr. Vikas Bhasin, MD, Saya Homes

For older projects developer will go for older rates and hence the fear of losses is gone. Now the sector can get back to delivering homes to the buyers according to the demand. After April 1, we may see an upsurge in houses that will fall in the category of affordable homes as per the GST Council’s definition.

Ashok Gupta, CMD, Ajnara India Ltd.

The GST Council’s decision to provide developers with an option to either go with the old rates with ITC or choose the newer GST rates without ITC is a welcome move. It is beneficial for developers who had already worked out the sale price after factoring in the input credits of the project and had already passed on the benefits to the customers. The confusion is now clear. And going by the reason, most of the developers who have announced the project earlier will go for the option where they can charge GST at old rates i.e. 8 per cent and 12 per cent.

The new rates would be applicable for all the projects that start after April 1, 2019, and hence there will be no tax blockage at time of working out the sale price. In these cases, the credit reversal would be done proportionate to area space and developers have to work out the amount of input credit for various projects.

Deepak Kapoor, Director, Gulshan Homz & Ex-President, CREDAI Western UP

Now we are expecting that with the new GST rate regime coming into effect from April 1, 2019, the affordable segment will look at increased demand. It has always been in demand and with the new GST rate of 1 per cent we have seen the demand rise. The sector has to work fast to make sure they are ready to implement the new rate cut after finalising their cost of project and sale price. The biggest challenge would be to communicate to the customer about the revised pricing. We do not expect that rates will change drastically looking at the market situation, but we are sure of the positive effects that this change will have on the overall sentiments of the real estate market.