The GST rate has declined from 12% to 8% on the purchase of houses availing the credit linked subsidy scheme under the Pradhan Mantri Awas Yojana as well as the houses that are constructed under a project that has got an infrastructure status. As per the scheme, a first time house buyer with an income up to INR 18 lakh per annum can avail a benefit of upto INR 2.7 lakh when purchasing a house or an apartment of 150 square metres carpet area. This move will give a push to affordable housing.
Buyers who do not qualify for the credit linked scheme will have to pay 12% GST for the same house. The benefit will also be extended to affordable housing project with a maximum carpet area of 646 sq ft. In this case, the condition of being a first time buyer will not be applicable. Whether the buyer gets the CLSS benefit or not, GST will be charged at 8%. With a fall of 4% in the rate of GST, this decision will give a strong push to the real estate sector.
There is a cap on the size of housing unit in order to be eligible for the benefit under CLSS. This has been kept at 1,615 sq ft area that is equivalent to 2,200 sq ft built up area. This could be a three bedroom apartment in most metro cities. Additionally, the cap of INR 18 lakh will be more than sufficient to cover a lot of first time house buyers. However, individuals buying their second house are not eligible for the scheme. This decision could lead to rapid growth and development of the real estate sector and help achieve the target of housing for all by 2022. Currently, the developers pay GST on the inputs which are used for the construction of a project and the same is taken back in the form of credit.
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