1 pc GST on affordable housing will give a boost to real estate sector, says Arun Jaitley

New Delhi [India], Feb 24 (ANI): In an attempt to give a boost to the real estate sector, the Goods and Services Tax (GST) Council on Sunday decided to reduce the GST on affordable housing properties without input tax credit (ITC) to one per cent.
The effective GST of 5 per cent shall be applicable without ITC on residential properties outside the affordable segment, which was also decided by the GST Council at its 33rd meeting here on Sunday.
“Through this rate cut, we want to give real estate sector a boost. The new rates will be effective from April 1, 2019,” said Finance Minister Arun Jaitley while briefing media persons after the GST Council meeting.
“We have adopted twin definitions of affordable housing—one on basis of the carpet area and second on the basis of cost. In metros, a flat of 60 square meter carpet area and costing Rs 45 lakh in the apartment will fall in the affordable housing category. In non-metros, the size will be 90 square meter carpet area and costing Rs 45 lakh,” he said.
According to a press statement issued after the GST Council meeting, the definition of affordable housing shall be “a residential house/flat of carpet area up to 90 sqm (square meter) in non-metropolitan cities and towns and 60 sqm in metropolitan cities having value up to Rs 45 lakh, both for metropolitan and non-metropolitan cities.”
“Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, and Faridabad), Hyderabad, Kolkata, and Mumbai (whole of MMR or Mumbai Metropolitan Region,” said the statement.
“Intermediate tax on development right such as TDR (transfer of development rights), JDA (joint development agreements), (lease premium), FSI (floor space index) shall be exempted only for such residential property on which the GST is payable,” further stated the statement.
Commenting on the decision to reduce the GST on affordable housing, West Bengal’s Finance Minister Amit Mitra said: “Why I said for one per cent is because the Central government’s own research shows that the tax incidents across states averages to 0.6 per cent. So, my justification was very solid.”
“I am happy that Union Finance Minister Arun Jaitley and the GST Council have accepted my submission for the sake of affordable housing. A fight on affordable housing should not be discriminated. Group of Minister had proposed three per cent, but I felt that would punish affordable housing,” he said. 
“Secondly, I had also suggested five per cent for above 40-45 lakhs in terms of the housing market. That came from tax incidents that their own research produced of 4.7 per cent tax. I am happy that five per cent has also been accepted,” he said.
Talking about advantages of the recommendations made at the GST Council meeting, the statement said: “The buyer of a house gets a fair price and affordable housing gets very attractive with GST at one per cent.”
“Interest of the buyer/consumer gets protected. ITC benefits not being passed on to them shall become a non-issue. Cash flow problem for the sector is addressed by the exemption of GST on development rights, long term lease (premium), FSI, etc,” the government added in the statement. (ANI)